Asia markets saw a massive selloff on Monday, driven by the Bank of Japan's rate hike. US futures and crypto were also down.
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Monday could go down as one of the worst days for stocks in recent history.
The market rout started in Asia, where stocks kicked off with sharp declines that only got worse over the day. US futures and European stock markets also got dragged into the fray. Major crypto coins, including Bitcoin and Ether, took significant hits.
To be sure, markets were already jittery before Monday's rout due to fears of a US recession, caution over the AI hype, and geopolitical tensions in the Middle East.
But, as Tony Sycamore, an analyst at IG Australia, told Bloomberg TV, it was the Bank of Japan's interest rate hike on July 31 that was "the straw that broke the camel's back."
"We haven't seen a day of carnage like this, really, since the COVID selloff back in February, March 2020," Sycamore told the network.
The VIX index, a key volatility indicator, was up 48% at one point on Monday, a four-year high.
Here's how the massive selloff hit stock markets.
Japan's stock market has been a standout over the past few years, with the benchmark Nikkei 225 index posting outsized gains of 44% in 2023 that bettered those from the S&P 500.
The Nikkei continued to extend gains in 2024, first hitting a record high in February — the first time in 34 years — before breaching new highs.
Its gains were fueled by the AI boom, as well as a weak yen that made it cheaper for foreign investors to buy Japanese equities. The weaker currency also helps Japanese exporters selling products overseas.
However, the BOJ's interest-rate hike unwound trades related to the yen, sending the Nikkei way down and wiping out all of its gains this year.
On August 5, the Nikkei 225 index crashed by as much as 13% and closed 12.4% lower — the worst since the Black Monday stock market crash of October 1987, when the Japanese index lost 14.9%.
The Nikkei shedding 4,451.28 points was also its largest-ever loss in terms of points.
South Korea's Kospi also marked a grim milestone on August 5 after closing 8.8% lower. Its losses were so huge that trading halts kicked in.
The Kospi's decline was its biggest percentage decline since October 24, 2008 during the Global Financial Crisis.
The losses were driven by heavy declines in the shares of semiconductor chip heavyweights Samsung Electronics and SK Hynix, which tanked 10.3% and 9.9%, respectively.
Like Japan, the Kospi has been boosted by the AI rush as investors bet on its chipmakers.
Taiwan's benchmark Taiex stock index closed 8.4% lower in its worst day since 1967, when trading started.
Taiwan is the world's semiconductor hub, where chip giant Taiwan Semiconductor Manufacturing Company is based, so the Taiex has also benefited tremendously from the AI craze.
The index surged nearly 70% from the start of 2023 to its record high last month, before massively crashing on August 5, marking its worst day in history.
On Monday, TSMC shares closed nearly 10% lower.
Among the sea of red in Asia, Australia's ASX 200 index appeared less bruised.
The benchmark Australian index closed 3.7% lower, but still marked its largest one-day decline since May 2020, during the thick of the COVID-19 pandemic.
The ASX200's losses were led by losses in IT stocks.
However, Australia is a commodity giant and the ASX's largest company by market value is miner BHP, which fell just 2.1%. Fellow mining heavyweights Fortescue and Rio Tinto fell 1.9% and 0.1%, respectively.
