What a difference a month makes. In July, stock indices in the United States hit all-time highs, led by an artificial intelligence (AI) investment boom that steered technology giants like Apple, Microsoft and NVIDIA to historic levels.

Investors had earlier brushed off some signs that the US economy was slowing down but did an about-face when a disappointing job markets report, released Friday, showed that US firms hired nearly a third fewer workers than expected in July — 114,000 vs. 175,000 that were forecast. US unemployment also ticked up to 4.3% from 4.1% the previous month, forewarning the heightened risk of a recession.

On the other side of the world, Japan's central bank last week raised interest rates, causing a further rise in the Japanese yen against the US dollar. Investors, who had borrowed money in yen and bought stocks, commodities and bonds in dollars, suddenly faced higher loan costs and and foreign exchange losses. Cue the stock market rout.

After a large fall on Friday, global stock indices continued their rout on Monday. Japan's Nikkei 225 index plummeted at one point by 13.4% — its largest single-day drop since Black Monday in 1987. Japanese stocks had already fallen nearly 6% during the previous session. The Nikkei showed signs of recovery on Tuesday, closing up 10% higher than the previous day.

The US tech-heavy NASDAQ index lost nearly 9% over the past two trading days, while the S&P 500 — comprising the 500 largest firms on US stock exchanges — fell 4%. European markets were also down sharply. Wall Street's so-called fear gauge, the VIX index measuring stock market volatility, jumped to 50 — its highest level since the middle of the first COVID lockdown in April........

© Deutsche Welle