Japan’s benchmark Nikkei 225 stock index plunged 12.4% on Monday in the latest bout of selloffs that are shaking world markets as investors fret over the state of the U.S. economy.

The Nikkei closed down 4,451.28 points at 31,458.42. The market’s broader TOPIX index fell 12.8% as selling picked up in the afternoon.

European markets plummeted when trading began Monday following the massive selloffs in Asia. 

Shares fell more than three percent in Frankfurt, Germany while the Paris market lost 2.6 percent and London fell 2.3 percent, Agence France-Presse reported. The Milan market plunged four percent and Madrid gave up 2.8 percent.

Darkening the outlook for trading on Wall Street, early Monday futures for the S&P 500 were 2.5% lower and those for the Dow Jones Industrial Average were down 1.6%.

A report Friday showing hiring by U.S. employers slowed last month by much more than expected has convulsed financial markets, vanquishing the euphoria that had taken the Nikkei to all-times highs of over 42,000 in recent weeks.

Stock markets have mostly been traveling in one direction, higher, with relatively few huge swings in the past year. A bonanza around artificial-intelligence technology helped drive Big Tech stocks higher, while other areas of the market held up amid rising hopes for coming cuts to interest rates by the Federal Reserve.

But professional investors have been warning that shakier times may be ahead given uncertainty about how quickly the Fed will cut interest rates and other big questions.

Stocks tumbled around the world after the employment data fanned worries the U.S. economy could be cracking under the weight of high interest rates meant to tame inflation.

“To put it mildly, the spike in volatility-of-volatility is a spectacle that underlines just how jittery markets have become,” Stephen Innes of SPI Asset Management said in a commentary. “The real question now looms: Can the typical market reflex to sell volatility or buy the market dip prevail over the deep-seated anxiety brought on by this sudden and sharp recession scare?”

World markets overreacting?

Worries over the U.S. economy were rippling around the world even though the U.S. economy is still growing and a recession is far from a certainty.

The S&P 500’s 1.8% decline Friday was its first back-to-back loss of at least 1% since April. The Dow Jones Industrial Average dropped 1.5% and the Nasdaq composite fell 2.4%.

Friday’s losses dragged the Nasdaq composite 10% below its record set last month. That level of drop is what traders call a “correction.”

The rout began just a couple days after U.S. stock indexes had jumped to their best day in months after Federal Reserve Chair Jerome Powell gave the clearest indication yet that inflation has slowed enough for cuts to rates to begin in September.

Now, worries are rising the Fed may have kept its main interest rate at a two-decade high for too long, raising risks of a recession in the world’s largest economy. A rate cut would make it easier for U.S. households and companies to borrow money and boost the economy, but it could take months to a year for the full effects to filter through.

“Specifically, the scenario of higher unemployment constraining spending and further restraining hiring and incomes and economic activity leading to a recession is the feared scenario here,” Tan Boon Heng of Mizuho Bank in Singapore said in a report.

Investors will be watching for data on the U.S. services sector from the U.S. Institute for Supply Management due later Monday that may help determine if the selloffs around the world are an overreaction, Yeap Jun Rong of IG said in a report.

Japanese shares a Monday bellwether for world markets? 

The Nikkei 225 dropped 5.8% on Friday, making this its worst two-day decline ever. Its worst single-day rout was a plunge of 3,836 points, or 14.9%, on a day dubbed “Black Monday” in October 1987. At one point, the benchmark sank as much as 13.4% on Monday.

Share prices have fallen in Tokyo since the Bank of Japan raised its benchmark interest rate on Wednesday. The Nikkei is now down 3.8% from a year ago.

One factor driving the BOJ to raise rates was prolonged weakness in the Japanese yen, which has pushed inflation to above the central bank’s 2% inflation target. Early Monday, the dollar was trading at 142.39 yen, down from 146.45 late Friday and sharply below its level of over 160 yen a few weeks ago.

The euro fell to $1.0896 from $1.0923.

Shares surged to stratospheric heights earlier this year on frenzied buying of shares in companies expected to thrive thanks to advances in artificial intelligence. The latest setback has hit markets heavily weighted toward computer chipmakers like Samsung Electronics and other technology shares: On Monday, South Korea’s Kospi plummeted 9.3% as Samsung’s shares sank 11.6%.

Taiwan’s Taiex also crumbled, losing 8.4% as Taiwan Semiconductor Manufacturing Co., the world’s biggest chip maker, dropped 9.8%.

Oil prices were little changed. U.S. benchmark crude oil gained 9 cents to $73.61 per barrel while Brent crude was flat at $76.81 per barrel.

Elsewhere in Asia, Hong Kong’s Hang Seng index lost 2.5% to 16,519.78 and the S&P/ASX 200 in Australia declined 3.8% to 7,637.40.

The Shanghai Composite index, which is somewhat insulated by capital controls from other world markets, edged higher but then gave way, losing 1.2% to 2,870.34.