Stocks surge back as Asian markets on the recovery after worst day in decades
Experts are warning the US economy could still face an economic downturn
GETTY
Stock markets around the world are managing to bounce back following the global hit that was fueled by US recession fears yesterday.
But analysts have warned there will likely be more volatility to come.
Tokyo’s benchmark Nikkei 225 index jumped 3,217.04 points, to end at 34,675.46, a day after plunging 12.4 per cent in its worst rout since Black Monday in 1987.
Japan’s broader Topix index added 9.3 per cent, or 207.06 points, to 2,434.21, with nearly all Asian markets higher and the FTSE 100 and other European markets on track to jump when trading begins.
The FTSE 100, the blue-chip index, was up 0.3 per cent after wiping more than £40bilion off the index.
The mid-cap FTSE 250 index added 0.6 per cent having fallen to its lowest level in more than three months in the previous session.
With investing, people can lose money as well as gain moreGETTYMatt Simpson, senior market analyst at City Index, said: “We’re not yet sure if this is just a breather between water-boarding's or there is more pain to follow.”
The slump followed data released on Friday which showed weaker employment levels, while another report pointed to continuing weakness in the manufacturing sector.
This raised concerns as to whether the Federal Reserve has waited too long to cut interest rates to try to support the US economy.
There are now predictions of a 83 per cent interest rate cut by the Federal Reserve in its next meeting in September to put an end to a sell-off in global markets.
Traders are betting interest rates will be cut a whole percentage point by the end of the year.
Economist Campbell Harvey told Bloomberg that “the Fed likely realises now that they made a mistake last week” by leaving interest rates unchanged at their 23-year highs.
He added: “The Fed has waited too long to take action.”
Commentators explained that a stronger yen had led investors to unwind their "carry trades", in which they borrowed in the cheap Japanese currency to invest in higher-yielding assets, such as equities.
While Wall Street's three main indexes suffered another day of pain -- with the Nasdaq down more than three percent -- a forecast-beating read on the key US services sector provided some solace.
Japan's Prime Minister Fumio Kishida said at a scheduled news conference Tuesday: "The stock market has been moving again today, and I think it is important to judge this situation calmly."
"We will continue to monitor the situation with a sense of urgency and to carry out economic and fiscal management in close cooperation with the Bank of Japan."
Shanghai, Sydney, Seoul, Taipei, Mumbai, Bangkok and Manila also rose but Hong Kong gave up early gains to sit marginally in the red.
Wall Street's three main indexes suffered another day of pain
PASingapore and Wellington also suffered more selling.
London edged up after losing around two per cent Monday. InterContinental Hotels Group advanced as much as 4.2per cent after the Holiday Inn-owner reported a 3.2per cent rise in revenue per available room (RevPAR) in the second quarter.
Keller Group rose as much as 13.8 per cent to top the FTSE 250 after the engineering contractor reported its half-yearly results.
Commenting on Friday's figures, Paul Krugman, Nobel prize-winning US economist wrote on social media: "I wasn't calling for an inter-meeting cut, because that might signal panic.
"But since we may be seeing a panic anyway, that argument loses its force. Real case for an emergency cut soon."
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