manufactiurtingJapan’s Topix index was back to its 1983 low (695). It was not alone. Across East Asia, stocks crashed today. Only India’s stock market was up today, just barely.
Toyota fell 3.% in one day. It reported low U.S. sales.
Sony fell below 1,000 yen for the first time since 1980.
Hitachi Construction Machinery Co. (6305), which sells to China, fell almost 4%.
The Nikkei 225 fell 1.7 percent to 8,295.63. This erased all of its gains for 2012.
“This is a panic selloff,” said Koichi Kurose, chief economist at Resona Bank Ltd., Japan’s fifth-largest lender by market value. “Action from policy makers is the only thing that will calm the market. The market is pricing in a deterioration in the U.S. economy through summer.”
The Topix has fallen over 20% since March 27. This indicates the start of a bear market, according to some market technicians.
I don’t pay much attention to supposed bear market calls. I pay attention to the Austrian theory of the business cycle. It indicates that the Asian boom, stimulated by fiat money, has reversed.
China is slowing. It is the 800-pound panda.
Heavy industry is hit hardest. This is consistent with Austrian theory of the cycle. The bust hits capital goods harder than consumer goods. They are more specific. Falling demand hits their prices harder: fewer alternative uses.
Shipping lines slid after the Baltic Dry Index (BDIY), a measure of shipping costs for commodities, dropped 2.1 percent. Nippon Yusen, Japan’s biggest shipping line by sales, fell 3 percent to 193 yen. Mitsui O.S.K. Lines Ltd. (9104), ranked second in the sector, fell 5.3 percent to 249 yen.
This is consistent with the assumption of a looming worldwide recession.
When East Asia’s shares are getting hammered, and Europe’s are too, the USA will be facing growing pessimism among stock market investors. There is no place to hide.