Recovery in Japan but global markets remain volatile

After a turbulent few days, there are strong indications of recovery in Japan after the Nikkei almost bounced back. Yet while global markets were initially buoyed, they are still facing losses.

After dropping 12% on Monday, the Nikkei 225 stock index almost recovered its losses, jumping 10.23% on Tuesday and enjoying its biggest one day points gain. Jesper Koll of the Monex Group highlighted that Japan is in a ‘strong’ position with no risk of recession and a focus on increasing capital returns. South Korea and Taiwan stock markets also saw a rise of around 3.5%

The hit on the Nikkei followed the Bank of Japan raising interest rates. The rise (only the second time the bank has raised interest in 17 years) inflated the value of the yen against the dollar, increasing the value of exports. Combined with fears of the US falling into recession following a poor employment report, markets across the globe have been facing uncertainty.

Tuesday saw gains across markets in Europe in early trading but then dropped. The FTSE saw a 0.33% gain at opening, before dropping again. The Nasdaq went down a further 3.4%. While on Monday the S&P 500 went down 3% and the Dow Jones fell 2.6%.

The focus is on the US and when and by how much the Federal Reserve will cut interest rates. Last week, it voted to hold, decision critics including Elon Musk have called foolish and a ‘missed opportunity’ to protect the US economy.  The next decision by the Fed is scheduled for September but Mohamed El-Erian, an economist for Queen’s College Cambridge, told BBC’s Today that waiting risks tipping towards a higher probability of recession.

‘What happens in the US does not stay in the US – the world as a whole would suffer if the US were to go into recession.’

Analysts predict that the markets will stay volatile until the Fed’s next meeting.

(Sources: bbc.co.uk)