Japanese shares experienced a significant rebound in morning trading on Tuesday, recovering from a substantial decline on the previous day that reverberated across global financial markets.
The Nikkei 225 index surged by nearly 10% following a dramatic drop of over 12% on Monday. This decline was triggered by the Bank of Japan’s second interest rate hike in 17 years, which strengthened the yen against the dollar. As a result, Japanese stocks became more expensive for foreign investors and buyers, impacting exports.
The downturn in Tokyo’s market mirrored falls in the US, UK, and European markets, driven by concerns of an impending slowdown in the American economy.
Market analysts maintain a positive outlook on Japanese equities. An executive from a prominent Japanese financial firm expressed confidence, stating, “Japan’s fundamentals are robust, recession risks are negligible, and corporate leaders are committed to increasing capital returns.”
In South Korea, the Kospi index recovered by more than 4% after an 8.8% drop, marking its most significant loss since the 2008 financial crisis. Taiwan’s stock index also made a notable recovery, trading over 3% higher after witnessing an 8.4% decline the previous day.
In the United States, the tech-heavy index opened down 6.3% but reduced its losses to finish 3.4% lower. The S&P 500 and Dow Jones Industrial Average ended the day down 3% and 2.6%, respectively. European markets saw similar trends, with the CAC-40 in Paris closing 1.4% lower, while both Frankfurt’s DAX and the UK’s FTSE 100 dipped around 2%.
Concerns about economic growth were intensified by weak US jobs data released on Friday, igniting discussions regarding potential interest rate cuts by the Federal Reserve. Economists indicate that market volatility is likely to persist leading up to the Fed’s decision in September, suggesting unpredictable market swings.
Furthermore, there are increasing worries that shares of major technology companies, especially those heavily invested in artificial intelligence (AI), may be overvalued and facing obstacles. Adding to the uncertainty, a leading chipmaker recently announced significant layoffs and disappointing earnings results. Speculation is also mounting regarding potential delays from another major player in the AI sector, known for benefiting from the surge in AI demand.
