Most stock markets rebounded on Tuesday after a global sell-off on Monday, which was driven by concerns about a possible U.S. recession. This led to calls for the Federal Reserve to lower interest rates before its next meeting.
Tokyo, which experienced a record loss on Monday, saw a major recovery, jumping over 10% as traders bought up stocks that had fallen sharply.
London also rose slightly after losing around 2% on Monday, and both Paris and Frankfurt saw gains as well.
U.S. futures pointed to a positive opening, with the Dow Jones, Nasdaq, and S&P 500 all showing significant early gains.
However, analysts cautioned that more market fluctuations might be expected.
The market downturn followed a report showing fewer new U.S. jobs than anticipated and continued weakness in manufacturing. This sparked concerns that the Federal Reserve’s prolonged high interest rates might lead to a recession.
The “Sahm Rule,” which signals an early recession if unemployment averages 0.5 percentage points above its recent low, was triggered by the recent data.
A stronger yen also caused investors to unwind trades where they had borrowed in Japanese yen to invest in higher-yielding assets.
Despite Wall Street’s three main indexes suffering losses, a strong report on the U.S. services sector provided some relief.
Tokyo’s Nikkei index, which dropped over 12% on Monday, surged 10.2% on Tuesday. Major companies like Toyota, Sony, and Tokyo Electron saw significant gains.
Analysts noted the broad market rebound and emphasized the importance of watching the foreign exchange market. Japanese Prime Minister Fumio Kishida stated the need for careful monitoring and cooperation with the Bank of Japan.
Markets in other cities, including Shanghai, Sydney, Seoul, Taipei, Mumbai, and Bangkok, also saw rises, though Hong Kong ended lower. Singapore and Wellington experienced more selling, while Manila remained unchanged.