Japanese and European stock markets rebounded on Tuesday, after a wave of panic gripped financial markets the day before amid fears of a recession in the United States.
On Monday, the decline in stock indices affected all the major financial centres in the world, starting with a dizzying fall in Tokyo. The New York Stock Exchange, which sets the tone for financial markets, ended with a sharp fall, with two of its three main indices having their worst session in two years.
But “a reversal of the trend is taking place on Tuesday” on the financial markets, comment analysts at Deutsche Bank.
Markets are calming down after the anxiety generated by the publication on Friday of a report on US employment which disappointed expectations.
Faced with an unemployment rate that was rising more sharply than expected and a lower number of job creations than expected, the market feared seeing this as a signal of too strong a slowdown in the American economy, with the monetary policy led by the American central bank (Fed) as the culprit.
The Fed raised rates to their highest in 20 years in an effort to slow the US economy and finally bring inflation down to 2%, after it soared to a 40-year high of 9.5% in a year in June 2022.
As a first rate cut, eagerly awaited by investors, approaches, markets fear that the Fed has waited too long to act, thus running the risk of plunging the American economy into recession by repeatedly slamming on the brakes.
“The change in trend” observed in the markets on Tuesday “appears to coincide with comments from Austan Goolsbee,” the president of the Federal Reserve Bank of Chicago, who told CNBC the day before that the employment data “does not look like a recession at this point” and that the Fed “could wait for more data before the September meeting,” Deutsche Bank analysts point out.
Meanwhile, U.S. service activity rebounded in July, according to a data released Monday, and that data “may also have helped persuade markets that the jobs report is not as bad as they feared,” they added.
In Tokyo, the main stock market index, the Nikkei, soared by 10.23% on Tuesday, the day after a fall of 12.4% and its worst drop in terms of points in its history.
In Europe, the day after a sharply lower closing, the main stock markets are also rebounding. At around 07:35 GMT, Frankfurt was up 0.77%, London 0.47%, Amsterdam 0.76%, while Paris was up only 0.10%.
On the bond market, the interest rate on ten-year US government bonds was at 3.87%, compared to 3.79% on Monday. The German bond with the same maturity was at 2.22%, compared to 2.19%.
Yen down
The day after the surge, the yen was down 1.09% against the dollar at 145.78 yen per dollar at around 07:30 GMT and 0.98% against the euro, at 159.46 yen per euro.
The Tokyo market experienced a “black Monday” the day before, under the combined effect of the slowdown in the American economy and the unwinding of a speculative movement known as a “carry trade” on the yen.
This movement consists of borrowing money in the currency of a country whose central bank practices low rates in order to invest it in a currency with higher returns.
The yen had not seen such an appreciation in a session since December, when speculation about the end of negative rates by the Bank of Japan was rife.
On the oil side, prices rose on Tuesday: North Sea Brent rose 0.62% to $76.77 and its American equivalent, a barrel of West Texas Intermediate (WTI), rose 0.85% to $73.56.
Bitcoin was up 2.52% at $55,764.