In what resembles a “domino effect,” the indices of the most prominent global financial markets and stock exchanges in Europe, Asia, and America, and consequently other economies, declined, reinforced by “serious fears of a recession in the American economy,” in addition to a “hot” geopolitical context in which the risks of the expansion of the Middle East conflict have escalated, awaiting the threatened Iranian response in a region that “could ignite at any moment.”
According to what Hespress newspaper followed, the global financial and business markets lived to the rhythm of “red trading” throughout Monday; which brought back to the minds of economists “historical collapses” that silently marked the history of the global economy, especially the 2008 global financial crisis.
For example, the Japanese Stock Exchange indices fell to “their lowest level since 1987” before losses accelerated in the global currency market and the Asian, Arab and European markets, in addition to “unprecedented” losses accumulated by oil and digital cryptocurrencies.
Financial analysts and experts, who spoke to Hespress, downplayed the impact of the factor of “escalating geopolitical tensions in the Middle East between Iran and its agents on the one hand and Israel on the other,” thus suggesting fears of a recession.
The same concerns were reinforced by investors' view that "the US central bank (the Federal Reserve) may have maintained its high interest rates for too long."
Cryptocurrency prices fell sharply during Monday's trading, with market value falling and daily trading volume surging by more than 200 percent, in a sign of mounting selling pressure from investors amid looming global economic and geopolitical risks.
🔸“The beginning of a stronger shock”
While global markets appeared to be “red,” “the strong selling that markets in America and similarly strong economies have witnessed is the first spark of a state of panic and fear that markets are witnessing at the start of trading this week,” explained Moroccan financial analyst Tayeb Aiss, who stressed that this is “only the beginning and the prelude to stronger tremors and shocks that the global economy will witness.”
Aiss continued in a statement to Hespress: “The reason is basically due to the abnormal and significant inflation that we have witnessed in recent months during the evaluation of the shares of giant technology companies and digital economy players.. and we are currently witnessing the re-evaluation and rearrangement of their real value in the markets and stock exchanges.”
The same financial analyst explained, “The possibility of stronger repercussions of this tremor will be experienced by the global economy in the coming days and weeks amid serious growing concerns about the recession of the American economy after the jobs report issued at the end of last week.”
He added, commenting to Hespress: “Everything we notice about the decline in the shares of the digital economy and the value of global currencies makes us face the presence of indicators of a crisis that are available, but not announced until now,” stressing that it is “a recession crisis that is very similar to the contexts of 2008, but not with the same reasons and conditions.”
Regarding the expected impact, Tayeb Aiss confirmed that they are “successive collapses of traditional and crypto-asset financial markets, putting us in front of a shock wave with limited impact,” noting that “if the region ignites through a regional conflict, the repercussions will worsen in terms of their repercussions on economic markets.”
🔸“Result, not cause”
Badr Balaj, an expert in cryptocurrency markets, estimated, based on his follow-up of the “Monday crash,” that “the total cryptocurrency market has fallen below $2 trillion to reach $1.85 trillion,” considering that “cryptocurrency traders have faced significant losses, as major cryptocurrencies, including Bitcoin and Ether, have witnessed a sharp decline, resulting in the liquidation of more than a billion dollars.”
The financial analyst weaved many explanations for what happened; however, he stressed that “the decline is not a cause in itself, but rather a consequence of similar collapses and a result of the collapse of traditional financial markets, after fears of a recession,” continuing the explanation: “The portfolio of investors in digital assets usually includes their investments in traditional markets, and in times of crises they rush to resort to getting rid of their position in high-risk financial assets (Bitcoin is one of them), especially after actual indicators of the approach of the US economic recession cycle; which increases the risks of collapse.”
In his statement to Hespress, Balaj considered that “traditional financial markets were not only affected by the context of geopolitical tensions, as evidenced by the fact that the Iranian strike months ago did not have the impact we saw today”; rather, the reason is the employment data in the United States of America, which indicated an increase in the American unemployment rate.
The digital currency expert drew attention to the fact that “technology companies, currencies and stock exchanges have begun to be affected, which may extend to losses of encrypted financial assets,” amid “a rush to sell assets by major investors,” citing the example of “Warren Buffett,” the CEO of Google, and others who sold large assets they owned.
The same speaker considered that “the effectiveness of the US economy (the global economic health indicator) is at stake after disappointing results for most US companies during the first half of 2024; which was supported by the acceleration of workers’ operations. And in light of the silence of the US Federal Reserve as an indication of the stability of the interest rate; which opened predictions for a recession scenario.”