Nikkei plunges more than 7% and enters a bear market after the Wall Street rout

Japan's Nikkei 225 index plunged on Friday, closing down 3,643.13 points, or 5.96%, at 57,434.77, its third-largest point drop in history and its worst day since April 2025. During the session it fell more than 7% to an intraday low of 56,745.81, breaking below 60,000 points for the first time since May.

At the close, the Nikkei stood about 21% below its record intraday high of June 22, 72,831.73 points, putting it in bear-market territory, the threshold that marks a 20% fall from the peak. The broader Topix index also dropped nearly 6%. In South Korea, the Kospi fell as much as 8.7% and triggered a temporary trading halt.

The sell-off is direct contagion from Thursday's rout on Wall Street, where the Nasdaq plunged 5.5%, the S&P 500 lost 4.4% and the semiconductor index fell 12.3%. Investors fear the new Congress, under Democratic control after the midterm elections, will tighten regulation on data-center construction and slow investment in artificial intelligence. Nvidia fell 9.3% and AMD tumbled 17.3% in that session.

In Tokyo, the blow fell hardest on chip- and AI-linked companies: Rohm tumbled nearly 20%, Furukawa Electric lost more than 19%, Resonac fell about 15% and Kioxia dropped more than 12%, while SoftBank declined about 11%. Investors sought refuge in Japanese government bonds, according to Reuters.

The plunge continues Thursday's Wall Street sell-off, covered by this newspaper in Wall Street tumbles and erases the post-election rally. AMP chief economist Shane Oliver told Reuters the election result was the trigger for a correction in shares that were already expensive, while Saxo strategist Charu Chanana warned of an "element of panic" as leveraged positions were unwound at the same time. European markets now open watching whether the selling is contained or spreads.

Photo: Invezz

Source: Invezz