Global stocks rallied on Tuesday, partly reversing some of the previous day’s steep declines after recession fears in the United States triggered a brutal sell-off across markets, while a slew of positive corporate earnings also helped boost the recovery.
Japan’s Nikkei soared more than 10 per cent after plunging 12 per cent on Monday in its biggest one-day percentage drop since October 1987. The Japanese yen took a breather, after central bank officials said all the right things to soothe investor nerves.
In Europe, the Stoxx 600 rose 0.6 per cent, recouping some of Monday’s 2.2 per cent decline thanks to a pickup in banking stocks and travel and leisure shares. The Irish index of shares climbed 1.14 per cent, buoyed by banking and travel stocks.
London stocks rebounded on Tuesday, tracking gains across broader markets. By 0710 GMT, the blue-chip FTSE 100 index was up 0.6 per cent, after logging its worst fall in more than a year on Monday.
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The mid-cap FTSE 250 index added 1.3 per cent. It fell to its lowest level in over three months in the previous session.
“Some normalcy has started to return to the markets. We do not think the Fed will cut inter meeting, or will deliver a 50 bps cut in September. We do not think that the US economy (or Europe) is headed for a hard landing,” said Mohit Kumar, chief economist for Europe at Jeffries London.
Other markets in Asia also rebounded, but more moderately, appearing to settle somewhat after the rollercoaster ride that started the week.
Monday began with a plunge abroad reminiscent of 1987′s crash that swept around the world and pummelled Wall Street with more steep losses, as fears worsened about a slowing US economy.
“At this juncture, it is too early to call the market bottom given multiple moving parts and the momentum of selling. However, the key question to ask would be whether the economic and earnings outlook has changed materially and for now, it’s too early to jump the gun. We will have to monitor economic data in the coming weeks to see if recession fears are indeed warranted,” said Vasu Menon, managing director of investment strategy at OCBC in Singapore.
“With stock markets plunging around the world, traders are talking up the prospect of an emergency interest-rate cut from the Fed after it passed up the opportunity to ease policy last week. This seems unlikely. The market sell-off is due to an unwinding of yen carry trades and AI concerns and not because the US economy is broken and in dire straits. So, there is no reason for the Fed to step in and mitigate losses for equity investors.”
Currency markets remained on edge, with the yen down nearly 1 per cent after rising for five straight sessions to a seven-month high on Monday. - Reuters
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