Japanese shares rebounded in Tuesday morning trade after a dramatic plunge on Monday sent shockwaves through global financial markets. The Nikkei 225 stock index rose by as much as 10% after slumping by over 12% the previous day.
The market rout in Tokyo on Monday came after the Bank of Japan’s second rate hike in 17 years caused the yen to soar against the dollar, making Japanese stocks and exports more expensive for foreign investors and buyers. This led to a domino effect, with stocks in the US, the UK, and Europe also falling on fears of a slowdown in the American economy.
In South Korea, shares were also regaining ground on Tuesday, with the Kospi stock index up nearly 5% after a significant 8.8% drop the day before – its worst trading session since the global financial crisis of 2008. Taiwan’s main stock index was trading more than 1.5% higher after a record 8.4% drop on Monday.
In New York, the Nasdaq index opened 6.3% lower but managed to ease losses throughout the day, ending down 3.4%. The S&P 500 fell 3% and the Dow Jones Industrial Average was 2.6% down by the end of trading on Monday. In Europe, the CAC-40 in Paris trimmed losses to end 1.4% lower, while Frankfurt’s DAX and the UK’s FTSE 100 lost about 2% each.
The weak jobs data in the US on Friday sparked concerns about economic growth and speculation about potential interest rate cuts by the Federal Reserve. “Markets are very volatile at the moment and will likely stay volatile until the Fed decision in September. So we wouldn’t rule out rapid swings in both directions,” said Stefan Angrick, a senior economist with Moody’s Analytics.
There are also concerns about overvaluation in big technology companies, particularly those heavily investing in artificial intelligence (AI). Chipmaker Intel recently announced major layoffs and disappointing financial results, while there is speculation that rival Nvidia may delay its latest product launch.
The rollercoaster ride in global markets reflects the uncertainty and volatility facing investors as they navigate through economic challenges and geopolitical tensions.
