To calm market fears, central bank officials said the right things on Tuesday, helping global stocks recover from the previous day’s devastating declines. The Japanese yen fell somewhat.
The Nikkei rose more than 10% to almost 34,500 from Monday’s 31,458 finish. The index fell 12.4% in the previous session, its largest daily drop since Black Monday in 1987.
After Monday’s 2.2% dip, Wall Street’s S&P 500 futures jumped 1%, Nasdaq futures rose 1.4%, and Europe’s STOXX 600 index increased 0.7%.
The S&P 500 fell 3% and the Nasdaq fell 3.43% on Monday as fears of a U.S. recession frightened global markets.
After falling to 3.667%, 10-year Treasury note yields rose to 3.84%.
If you wake up to discover that Japan is down 10-12%, it’s going to scare the daylights out of the sanest person in the world, so it’s understandable that people take flight,” said IG chief market analyst Chris Beauchamp.
“On the flipside, I think people got a bit carried away yesterday and it always seems very dramatic at the time,” remarked. It’s common to observe weakness this season. Was that enough to reset markets or will there be more?”
To calm markets, San Francisco Fed President Mary Daly said it was “extremely important” to prevent a labor market collapse. Daly said she would decrease interest rates if needed and policy should be proactive.
“The Nikkei’s enjoying a decent retracement against Monday’s plunge, as Fed’s Daly and a stronger-than-expected ISM services report eased fears of a panic Fed cut next week,” said City Index senior market analyst Matt Simpson in Brisbane.
“Not a risk-on rally. We don’t know if this is a break between waterboardings or additional suffering.”
