TOKYO – Asia stocks rebounded in early trading on Aug 6 after their plunge the previous day, though Singapore stocks were still in the red.
The Straits Times Index was down 0.6 per cent at 9.35am local time after briefly rising when trading began.
Japan’s Nikkei index shot up 10.4 per cent as the yen slid more than 1 per cent against the US dollar after surging over 3 per cent on Aug 5.
Other Asian bourses were also higher. South Korea’s Kospi index was up 4.5 per cent while Australia’s S&P/ASX 200 rose 0.6 per cent and Hong Kong’s Hang Seng Index added 1 per cent.
US futures rose strongly, showing US markets may gain when trading begins later on Aug 6. The S&P futures were up 1.3 per cent while Nasdaq futures climbed 1.9 per cent.
The initial positive signs on Aug 6 suggest markets may be able to catch their breath following a dramatic day in which Wall Street’s “fear gauge” – VIX – at one point registered a record increase in data going back to 1990.
The Nikkei, as well as the broader Topix, dived 12 per cent on Aug 5 as investors fled equities on a stronger yen, tighter monetary policy and concern over the US economy’s outlook. A circuit breaker earlier was hit for Nikkei 225 futures.
“Panic selling may have run its course” and investors will likely buy back stocks, said Nomura Asset Management chief strategist Hideyuki Ishiguro. “Still, price movements today will probably be like a roller coaster ride because of rising anxiety in the global market.”
The yen fell as much as 1.5 per cent against the dollar on Aug 6, before paring some of its declines. The currency has still gained almost 11 per cent this quarter on expectations of further interest rate hikes by the Bank of Japan.
On Wall Street overnight, while the S&P 500 pared some of its losses to finish 3 per cent down, it still suffered the biggest slide in about two years amid strong trading volume.
The tech-heavy Nasdaq 100 saw its worst start to a month since 2008.
Still, futures show both those indexes may gain when US trading begins later on Aug 6.
Speculation about a looming US recession, mostly seen as premature, wiped out a celebratory mood driven by recent signals from the Federal Reserve about the timing of its first rate cut.
The repricing was so sharp that the swap market earlier assigned a 60 per cent chance of an emergency rate reduction by the Fed over the coming week. Those odds subsequently ebbed.
US treasuries lost some steam after a surge that briefly drove two-year yields – which are sensitive to monetary policy – below those on 10-year bonds. US 10-year yields rose five basis points to 3.84 per cent on Aug 6.
A gauge of perceived risk in the US corporate credit markets soared, with the turmoil effectively shutting down bond sales on what had been expected to be among the busiest days of the year.
After a very strong first half, the market had become extended on a short-term basis and the bar for positive surprises too high – and a little bit of bad news has gone a long way, according to Mr Keith Lerner at Truist Advisory Services.
“From a stock market perspective, our base case has not changed,” he noted. “Our work still suggests the bull market deserves the benefit of the doubt.
“However, we have been expecting a choppier environment into the back half of July and August given the sharp rebound from April, stretched sentiment, and the fact that we’re entering a seasonally weaker period of the calendar year.”
“Moreover, after strong first halves, historically we have seen a typical pullback of 9 per cent at some point, even while markets still tended to end higher by the end of the year,” Mr Lerner said. BLOOMBERG
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Publish date : 2024-08-05 15:11:00
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