Global Markets Rebound After Historic Plunge
Following a global market rout driven by US recession fears, most equities rallied on Tuesday. Tokyo, which experienced a record loss on Monday, led the gains, with the Nikkei soaring over 10% as traders bought undervalued stocks. Key companies like Toyota, Sony, and Tokyo Electron saw significant increases. Other Asian markets such as Shanghai, Sydney, and Seoul also posted gains, while Hong Kong, Singapore, and Wellington faced declines.
In Europe, London, Paris, and Frankfurt edged higher after Monday’s losses. Analysts, however, cautioned about potential volatility ahead.
The initial sell-off was triggered by disappointing US job creation data and continuing manufacturing sector weakness. Concerns were raised that the Federal Reserve’s prolonged high-interest rates might lead to a recession, as suggested by the “Sahm Rule,” which was triggered by the latest unemployment figures.
Market reactions were also influenced by a stronger yen, prompting investors to unwind carry trades. While Wall Street continued to struggle, with the Nasdaq down over three percent, a stronger-than-expected US services sector report offered some relief.
Japan’s Prime Minister Fumio Kishida emphasized the need for calm and close cooperation with the Bank of Japan in managing economic policies. Calls for the Fed to cut rates immediately intensified, with economist Paul Krugman advocating for an emergency rate cut, despite concerns about signaling panic.
Chicago Fed President Austan Goolsbee urged caution in overreacting to a single jobs report, highlighting the need for a forward-looking approach and readiness to act if the US economy deteriorates further.
