Japan’s Nikkei 225 surged after experiencing its largest one-day decline since October 1997. The Japanese yen weakened against the U.S. dollar following a recent strong rally, which contributed to a sell-off in the stock market both domestically and internationally.
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The Nikkei saw a significant 9.4% increase on Tuesday local time, rebounding from a 12.4% plunge on Monday.
The Japanese yen dropped to 144.59 against the dollar, although it was higher than its recent lows. The U.S. dollar, on the other hand, decreased by 1.62% to 144.18 yen at 4 p.m. ET on Monday, marking a 6.4% decline over five sessions. The dollar-yen exchange rate was 10.8% below its 52-week high set on July 10.
The Bank of Japan raised its key interest rate to 0.25% from 0%-0.1% on July 31, while also announcing plans to reduce bond purchases. Following this, the Federal Reserve hinted at upcoming rate cuts in the U.S., leading to heightened market concerns about a recession. These events prompted a rally in the yen as global investors unwound the longstanding yen carry trade, which boosted global liquidity.
The strengthening yen, U.S. recession fears, and recent news about Nvidia (NVDA) and Apple (AAPL) were key factors in the significant market losses witnessed worldwide on Monday.
Although U.S. stocks recovered slightly from their lows on Monday, major indexes still experienced significant declines. Treasury yields managed to recover most of their early losses.
U.S. stock futures showed an upward trend on Monday night, with tech stocks leading the way.
The turnaround of the Nikkei and yen, along with positive movements in other Asian markets, provide hope for stabilization in the global financial markets.
For stock market updates and more, follow Ed Carson on Threads at @edcarson1971 and on Twitter at @IBD_ECarson.
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