Most stocks advanced Tuesday after the previous day’s global rout, fueled by fears of a U.S. recession, led to calls for the Federal Reserve Board to cut interest rates before its next meeting.
Tokyo, which suffered a record loss on Monday, led the rise, jumping more than 10% as traders bought struggling stocks caught up in Monday’s bad day.
London edged higher after losing around 2% on Monday, while Paris and Frankfurt were also up.
According to Bloomberg, U.S. futures were trending higher, with the Dow Jones Industrials and Nasdaq gaining more than 100 points and the S&P 500 nearly 30.
But analysts warn there is likely to be more volatility ahead.
Kiyoshi Ota/Bloomberg via Getty Images
The decline follows data released Friday showing that far fewer jobs than expected were created in the United States last month, while another report highlighted continued weakness in the manufacturing sector.
That led to warnings that the Fed had kept rates at levels as high as they had been for more than two decades for too long and risked triggering a recession.
Some analysts have talked about the “Sahm rule,” which holds that an economy is in the early stages of a recession if the three-month moving average of unemployment is 0.5 percentage points above its lowest level in the previous 12 months. That assumption was triggered by Friday’s data.
Commentators also said a stronger yen had led investors to unwind their “carry trades” in which they borrowed in the cheap Japanese currency to invest in higher-yielding assets, such as stocks.
While all three major Wall Street indices had another tough day (with the Nasdaq down more than three percent), better-than-expected results in the key U.S. services sector provided some comfort.
Tokyo’s Nikkei, which fell more than 12% on Monday and suffered a record point loss, jumped 10.2% on Tuesday.
Toyota rose more than 12%, Sony more than 9% and chip giant Tokyo Electron 16.6%.
“This is a broad-based, broad-based gain,” Nomura analysts said, adding that investors would also pay close attention to the foreign exchange market.
Japanese Prime Minister Fumio Kishida said at a news conference Tuesday that “the stock market moved again today and I think it is important to judge this situation calmly.”
“We will continue to monitor the situation with a sense of urgency and conduct economic and fiscal management in close cooperation with the Bank of Japan.”
Markets in Shanghai, Sydney, Seoul, Taipei, Mumbai and Bangkok also advanced, but Hong Kong gave up early gains to end in the red.
Singapore and Wellington also suffered from increased sales, while Manila remained stable.
