Asian stocks continued their rally on Wednesday after reassuring messages on Japanese interest rates and upbeat Chinese imports data lifted the mood.
A dramatic week of double-digit losses and gains saw the Bank of Japan’s deputy governor move to calm investors as he stated there would be no more interest rate rises while the market was so volatile.
Fears of US recession risks and the unwinding of investments funded by a cheap yen had sparked market stress, and the hawkish turn by the Bank of Japan (BOJ) last week raised alarm about how fast the central bank would tighten monetary policy.
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The Nikkei, which had fallen over 2% during early trade, rallied on the deputy governor’s remarks to rise more than 3%. It closed up 1.19% at 35,089.62. The broader Topix finished 2.26% higher at 2,489.21.
The relatively modest gain follows a 10% jump on Tuesday, its third biggest one-day percentage gain, as the index clawed back most of its losses from Monday’s 12% descent. The double-digit plunge was the market’s biggest single day rout since the 1987 Black Monday crash.
While the yen had appreciated again since reversing on Tuesday from a seven-month peak hit at the beginning of the week, it slumped against the dollar following Shinichi Uchida’s remarks.
Among the largest percentage gainers in the Nikkei were Disco Corp, up 12.4%, followed by Japan Steel Works, which gained 11.63%, and Sumitomo Mitsui Financial Group, up 10.24%. Heavyweight SoftBank Group rallied 5.2% to give the index the largest lift.
The banking sector, which was one of the worst hit among the Tokyo Stock Exchange’s 33 industry sub-indexes during Monday’s slump, surged 7.9%.
China stocks saw a modest gain, buoyed by robust import growth, despite weaker export data. Hong Kong shares also experienced a rise.
China’s exports in July climbed by 7.0% year-on-year, slower than expected, while imports jumped 7.2%. Analysts from UBS cautioned about the outlook for exports, noting that they are currently a vital support for China’s sluggish economy.
The Shanghai Composite Index rose 0.09%, or 2.55 points, to 2,869.83, while the Shenzhen Composite Index on China’s second exchange edged down 0.06%, or 0.93 points, to 1,566.10. The blue-chip CSI 300 index edged back 0.05% with sectors like consumer staples and real estate seeing declines.
The Hang Seng Index in Hong Kong was up 1.38%, or 230.52 points, to close at 16,877.86.
Safe-Haven Demand
Elsewhere across the region, in earlier trade, Sydney, Seoul, Singapore, Mumbai, Bangkok, Wellington, Taipei, Manila and Jakarta were also in positive territory. MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 1.7%.
European markets were set to rally on opening, with Eurostoxx 50 futures firming 0.9% and FTSE futures adding 1.0%. Nasdaq futures rose 0.7%, having edged lower earlier in the day on a 12% dive in AI darling Super Micro Computer after it missed earnings estimates.
With safe-haven in less demand, Treasury yields ticked higher for a second session. US 10-year yields rose 2 basis points to 3.9069%, and well off Monday’s low of 3.667%.
Two-year yields climbed back to 4.0116%, from a deep trough of 3.654%, as markets scaled back wagers on an intra-meeting emergency rate cut from the Federal Reserve.
Futures now imply 105 basis points of easing this year, compared with 125 basis points at one stage during Monday’s turmoil, while a 50-basis-point cut in September was seen as a 73% chance.
Fears of an imminent US recession had also faded a little as the run of economic data still pointed to solid economic growth in the current quarter.
The Atlanta Fed’s much-watched GDPNow estimate is that gross domestic product is running at an annual pace of 2.9%.
In commodity markets, gold prices also turned higher, up 0.1% at $2,391.00 an ounce and short of last week’s $2,477 top.
Oil prices remained volatile as concerns about waning global demand warred with the risk of supply disruptions in the Middle East. Brent rose 0.2% to $76.63 per barrel, while US crude was also up 0.2% to $73.36 a barrel.
Key figures
Tokyo – Nikkei 225 > UP 1.19% at 35,089.62 (close)
Hong Kong – Hang Seng Index > UP 1.38% at 16,877.86 (close)
Shanghai – Composite > UP 0.09% at 2,869.83 (close)
London – FTSE 100 > UP 0.56% at 8,071.87 (0934 BST)
New York – Dow > UP 0.76% at 38,997.66 (Tuesday close)
- Reuters with additional editing by Sean O’Meara
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