Japanese stocks bounce back after biggest sell-off since 1987 Black Monday rout By Reuters
Written by Brigid Riley
TOKYO (Reuters) – Japanese stocks rebounded sharply on Tuesday, reversing most of the double-digit losses experienced the previous day as comments from the US Fed and data gave investors pause on their worries about an economic slowdown and rate hikes.
The rally, after the market's biggest one-day selloff since 1987's Black Monday, came as the yen pared its gains, indicating that the carnage in yen-backed global carry industries is also slowing.
In a choppy day of trading, the Nikkei was up 8% at 33,975.53 as of 0516 GMT, after falling 12.4% on Monday. The index ended at 2,623.1 points, having previously jumped more than 3,000 points to surpass its biggest intraday point gain on record.
The broader was up 7.5% at 2,394.33.
Investors were shaken by last week's decline in global stock markets, the risk of a recession in the US, and concerns that investment backed by the cheap yen could be wiped out, prompting a sell-off in Japanese currencies on Monday.
Traders said they now appear to be reconsidering the strength of their initial response, buying stocks that remain on the dip.
“Frankly, nothing fundamental has changed in the Japanese economy. It's the only leading exchange that sells,” said Ray Sharma-Ong, head of multi-asset investment solutions for Southeast Asia at abrdn.
The Nikkei rally helped lift other Asian stock markets. In a flash, US safe-haven yields rose from record lows in a sign that panic is waning.
But uncertainty remains, with analysts pointing to the possibility of volatile market movements in the near term.
“We're still not sure if this is just a breather in the middle of the water ride or if there's pain to come,” said Matt Simpson, senior market analyst at City Index.
Meanwhile, Japanese officials insisted on calm markets, with Prime Minister Fumio Kishida urging caution and asking market participants to calm down.
An emergency tripartite meeting of the Finance Ministry, the Financial Services Agency and the Bank of Japan is scheduled for 0600 GMT to discuss markets.
BOJ ASAP?
Khoon Goh, head of Asia research at ANZ, noted that the Nikkei rebounded to different levels after three previous periods of double-digit declines, including after the 2008 global financial crisis and the 2011 Tohoku earthquake. .
“But it took some time before the Nikkei recovered all those losses,” he said.
From July 11 through Monday's close of 31,458.42, the Nikkei saw 113 trillion yen ($792 billion) off its market high.
Monday's fall was a reminder that “it's impossible to isolate equity risk by region (or sector or style) during major corrections or bear markets,” said Stephen Dover (NYSE: ), chief market strategist and head of Franklin. The Templeton Institute at Franklin Templeton.
“An opportunity will arise, but in our view, it is premature to intervene at this point.”
Last week, the BOJ raised interest rates to levels not seen in 15 years, a hawkish move that analysts said further rattled the market especially given fears of a possible US recession.
“The market was worried that (the BOJ) might tighten too quickly,” said Kenji Abe, chief strategist at Daiwa Securities.
BlackRock (NYSE: ) Investment Institute said on Tuesday they see “significant risk of BOJ policy misalignment” and are revising their overweight position on Japan.
On Tuesday, the biggest price pullback was led by big tech stocks like chip-related shares Tokyo Electron, which rose 15%, and Advantest, which rose more than 13%.
The first AI-focused investor SoftBank (TYO:) Group jumped 8.6%.
Circuit breakers were triggered several times before and during the session, resulting in a temporary suspension of trading on Topix and Nikkei futures.
