JAPAN-ECONOMY-STOCKS
Global stock markets made a significant recovery on Tuesday after the previous day’s historic plunge, driven by fears of a potential US recession. The rally was fueled by speculation that the Federal Reserve may cut interest rates before its next meeting.
Tokyo led the rebound with the Nikkei surging more than 10% after experiencing a record loss of over 12% on Monday. Major Japanese companies also saw sharp gains, with Toyota up over 12%, Sony rising more than 9%, and Tokyo Electron jumping 16.6%.
Markets in Shanghai, Sydney, Seoul, Taipei, Mumbai, Bangkok, and Manila also saw gains, though Hong Kong and Wellington experienced slight declines. London and European markets in Paris and Frankfurt also recorded increases after significant losses the previous day.
Despite the recovery, analysts caution that further volatility may be expected. The global sell-off was triggered by disappointing US employment data and ongoing weakness in the manufacturing sector, raising concerns about a possible recession and prompting calls for the Fed to lower rates.
The “Sahm Rule,” which suggests that an economy is in the early stages of recession if the three-month moving average of unemployment is significantly above its recent low, was triggered by the latest data. Additionally, a stronger yen led investors to unwind “carry trades,” where they had borrowed in yen to invest in higher-yielding assets.
While Wall Street faced another tough day with the Nasdaq down over 3%, a better-than-expected report on the US services sector provided some relief.
Japan’s Prime Minister Fumio Kishida urged a measured response to the market fluctuations and emphasized continued economic management in collaboration with the Bank of Japan.
In the US, economist Paul Krugman has advocated for an immediate rate cut by the Fed, while Chicago Fed President Austan Goolsbee recommended caution, noting that one weak jobs report does not necessarily indicate a recession.
The yen, which had recently hit a six-month high, saw its gains stall and was trading just below 145 per dollar. The recent surge followed the Bank of Japan’s rate hike, which came just before the Fed’s anticipated cut.
Key market figures as of 0710 GMT include:
- Tokyo – Nikkei 225: Up 10.2% at 34,675.46
- Hong Kong – Hang Seng Index: Flat at 16,691.80
- Shanghai – Composite: Up 0.2% at 2,867.28
- London – FTSE 100: Up 0.6% at 8,052.24
- Dollar/Yen: Up at 145.40 from 144.05
- Euro/Dollar: Down at $1.0938 from $1.0959
- Pound/Dollar: Down at $1.2753 from $1.2773
- West Texas Intermediate: Up 1.2% at $73.78 per barrel
- Brent North Sea Crude: Up 0.9% at $77.00 per barrel
- New York – Dow: Down 2.6% at 38,703.27
News Editor