Japan Stocks Surge Over 7% Following Historic Drop
Japanese stocks experienced a dramatic rebound on Tuesday, recovering more than 7% after a historic decline in the previous session. This sharp recovery follows a period of intense volatility, with the Nikkei 225 and Topix indices experiencing their biggest single-day losses since the 1987 Black Monday crash.
Both the Nikkei 225 and Topix, which are now showing positive year-to-date performance, benefited from a series of factors contributing to the market's turnaround. The Bank of Japan's decision to raise interest rates to their highest level since 2008 had a notable impact, strengthening the yen to a seven-month high and providing a boost to domestic equities.
Concerns about a potential U.S. economic recession, exacerbated by a weaker-than-expected jobs report, had earlier spooked global markets. However, the Japanese market's recovery was supported by a strong performance in several key sectors.
Major Japanese corporations saw substantial gains. Mitsui, Japan's largest trading house, saw its stock rise by over 9%, while Softbank Group Corp. jumped more than 8%. Japanese automakers and semiconductor suppliers, including Honda and Renesas Electronics, also posted impressive gains, with each seeing increases of over 13%.
The yen traded at 145.37 to the U.S. dollar, marking a decrease of 0.83%, which contributed to the stock market's rebound.
In South Korea, the Kospi index surged more than 3%, and the small-cap Kosdaq index climbed over 5%. South Korean markets experienced a dramatic 8% decline on Monday, leading to the activation of circuit breakers and a temporary halt in trading. Samsung Electronics saw a 2.1% increase, while chip manufacturer SK Hynix grew by 4.5%.
Hong Kong's Hang Seng Index rose by 0.9%, although the Mainland China CSI 300 index remained relatively flat.
In Australia, the S&P/ASX 200 index gained 0.4%, reflecting a modest improvement in market sentiment.
Oil prices also saw gains, with Brent crude rising by 1.65% to $77.56 per barrel and U.S. West Texas Intermediate Crude increasing by 1.86% to $74.30 per barrel.
Economic data from Japan revealed a greater-than-expected drop in June household expenditure, which fell by 1.4% in real terms. However, average household income increased by 3.1% in real terms over the past year, and real wages saw a 1.1% increase in June compared to the previous year—the first rise in wages in 26 months. This robust wage growth provides the Bank of Japan with more leeway to tighten monetary policy further.
In Australia, the Reserve Bank of Australia maintained its cash rate at 4.35%, citing ongoing economic uncertainty and persistent inflation above its midpoint target for eleven consecutive quarters. The RBA revised its GDP forecast for the year-end December from 1.6% to 1.7% while also lowering its CPI expectation for the same period.
In the U.S., markets experienced significant declines. The Dow Jones Industrial Average fell by 1,033.99 points, or 2.6%, marking its worst session since September 2022. The S&P 500 dropped by 3%, and the Nasdaq Composite fell by 3.43%, ending 15% below its recent high.
Overall, while Japan's markets showed a strong rebound and other Asian markets followed suit, global economic uncertainties and sector-specific challenges continue to drive volatility across financial markets.