Global Stocks Rebound: Tokyo Leads Rally with Over 10% Surge

Global stocks showed a strong rebound on Tuesday following a tumultuous day driven by US recession fears, which had sent investors scrambling and caused a global rout in equities.

The recovery was led by Tokyo, where the Nikkei 225 index soared over 10%, marking a significant turnaround from Monday’s record losses.

On Monday, Tokyo’s Nikkei experienced its worst performance in history, plummeting more than 12%. However, investors took advantage of the beaten-down stock prices, leading to a robust recovery.

Major Japanese companies saw substantial gains, with Toyota’s shares climbing over 12%, Sony rising more than 9%, and chip giant Tokyo Electron surging 16.6%.

The dramatic upswing in Tokyo helped lift other Asian markets as well. Shanghai, Sydney, Seoul, Taipei, Mumbai, Bangkok, and Manila all posted gains.

In contrast, Hong Kong, which initially showed positive movement, ended the day slightly in the red, while Singapore and Wellington also saw further declines.

European markets mirrored the positive sentiment with London’s FTSE 100, Paris’ CAC 40, and Frankfurt’s DAX all showing upward trends. London, in particular, edged up after losing nearly 2% on Monday.

The rebound came after Friday’s disappointing US jobs report, which showed fewer new jobs than expected and highlighted ongoing weaknesses in the manufacturing sector.

This data intensified concerns that the Federal Reserve had maintained high interest rates for too long, potentially risking a recession.

Calls have since emerged for the Fed to cut rates before its next scheduled meeting to mitigate economic downturn risks.

Japan’s Prime Minister, Fumio Kishida, addressed the situation in a news conference, urging for calm and emphasizing the government’s commitment to close cooperation with the Bank of Japan in managing economic policies.

“The stock market has been moving again today, and I think it is important to judge this situation calmly,” Kishida stated. “We will continue to monitor the situation with a sense of urgency.”

In the US, despite another challenging day on Wall Street, a better-than-expected performance in the services sector offered some relief.

The Dow, Nasdaq, and S&P 500 all experienced significant drops, but the services sector data provided a glimmer of hope.

Analysts, however, caution that volatility may persist. Nomura analysts described the gains as “sweeping and across-the-board,” yet highlighted the need for continued vigilance in the forex markets.

The Japanese yen, which had surged to a six-month high on Monday, stabilized just below 145 per dollar, indicating some relief in currency pressures.

Market observers and economists, including Nobel laureate Paul Krugman, have called for immediate rate cuts by the Federal Reserve to preempt further economic weakening.

Krugman noted, “Real case for an emergency cut soon,” citing the potential panic stemming from the recent market behavior.

Despite the recovery, Moody’s Analytics warned that the sell-off and subsequent volatility would likely cause “sleepless nights” for policymakers, particularly at the Bank of Japan.

The central bank, which raised rates last week, is now under scrutiny to ensure that it does not repeat past mistakes of tightening policy prematurely.