Worldwide shares experienced an uptick on Tuesday, alleviating some of the sharp falls from the day before, whilst the Japanese yen paused its rally, following encouraging remarks from central bank officials aimed at calming worried investors.
Japan’s Nikkei index witnessed an impressive rebound, surging over 10 per cent after experiencing a 12 per cent slump on Monday, its biggest single-day percentage loss since October 1987.
On the European trading floor, the Stoxx 600 index made a minor recovery, rising by 0.6 per cent and gain back some of its 2.2 per cent fall on Monday, powered by a rise in banking shares, and travel and leisure stocks. The Irish share index similarly advanced, hiking up 1.14 percent, led by banking and travel stocks.
“Our outlook suggests we’re seeing the markets stabilise somewhat. We’re not expecting the Federal Reserve to make an unplanned rate cut or apply a 50 basis point cut in September. We don’t believe either the US or Europe’s economies are on a trajectory towards a hard landing,” commented Mohit Kumar, Jeffries London’s Chief Economist for Europe.
Asian markets, in tandem, bounced back, albeit less spectacularly, as they showed signs of settling after the turbulent start of the week.
Monday’s trading was marred by a sell-off similar to the infamous 1987 crash, worryingly echoing around the globe and battering Wall Street with more severe losses, due to heightened concerns of a downfall in US economic growth.
“At this point, it’s premature to declare that we’ve hit rock bottom considering a number of variables and the ongoing selling frenzy. It’s vital to assess whether there are significant changes in the economic and earnings forecast, and it’s premature to make such a call. Tracking economic indicators in the upcoming weeks should provide a clearer picture if recession concerns are indeed justifiable,” stated Vasu Menon, OCBC’s managing director of investment strategy in Singapore.
“Despite global stock market plummeting, some traders are hopeful of an emergency rate cut from the Fed after last week’s decision to maintain the status quo, although this seems highly unlikely. The market downswing reflects not a halt in the US economy but rather an unravelling of yen carry trades and a trepidation around artificial intelligence. Thus, there’s no need for the Fed to intervene and offset losses for equity investors.”
The foreign exchange market still remained somewhat precarious, highlighted by yen’s near 1 per cent dip after five consecutive sessions of growth which pushed it to a seven-month peak. – Reuters
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