Key points:
Asian share markets extended their gains on Wednesday, with a notable rise in the Nikkei. This surge followed the Bank of Japan’s unexpected indication that it would not raise interest rates while markets remain volatile, leading to a sharp fall in the yen.
The Nikkei’s 2% increase came after Tuesday’s 10% rally, suggesting that investors are regaining confidence after the recent market turmoil. On Monday, the index had slumped by 13%.
See: Nikkei225 trading at 35473.65 on the VT Markets app.
Bank of Japan (BOJ) Deputy Governor Shinichi Uchida confirmed on Wednesday that the central bank would refrain from raising interest rates during periods of financial instability.
This announcement boosted the dollar by 1.6% to 146.65 yen, recovering from the 141.675 low hit on Monday, though it remains below the July peak of 161.96.
The unravelling of the yen carry trade—where investors borrow yen at low rates to invest in higher-yielding assets—has driven much of the recent market rout but now seems to be stabilizing. MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 1.3%, while Korean stocks added 2.7%. China’s blue-chip index rose 0.4%, and Hong Kong’s Hang Seng index gained 1.3%.
In the U.S., Nasdaq futures rose 0.6% despite a 12% drop in Super Micro Computer after it missed earnings estimates. S&P 500 futures were up 0.3%, and EUROSTOXX 50 futures increased by 0.8%. FTSE futures added 1%.
You might be interested: US stock market rebound after major market selloff during recession fears
With safe-haven demand decreasing, Treasury yields climbed for a second session. U.S. 10-year yields rose to 3.9165%, well above Monday’s low of 3.667%. Two-year yields climbed back to 4.0163% from a low of 3.654%, as markets reduced bets on an emergency rate cut from the Federal Reserve.
Futures now imply 105 basis points of easing this year, down from 125 basis points during Monday’s turmoil. The chance of a 50-basis-point cut in September is seen as 73%.
Fears of an imminent U.S. recession have slightly eased as recent economic data indicates solid growth for the current quarter. The Atlanta Fed’s GDPNow estimate suggests that GDP is growing at an annual rate of 2.9%.
In commodity markets, gold prices slipped 0.2% to $2,383.77 per ounce, below last week’s peak of $2,477. Oil prices remained volatile due to concerns about global demand and the risk of supply disruptions in the Middle East. Brent crude eased 0.3% to $76.23 per barrel, while U.S. crude fell 0.4% to $72.87 per barrel.
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