Asian markets poised for another downturn: Recovery only short-lived

After a brief recovery driven by strategic bargain hunting, Asian stock markets are facing renewed downward movements. Futures for U.S. equities have already fallen in early trading. The futures indicate declines in Tokyo and Sydney, while Hong Kong could see gains after four consecutive days of losses. On Tuesday, both the S&P 500 and the Nasdaq 100 recorded gains of 1%, spurred by a recovery originating in Japan. The "fear index" VIX saw its largest drop since 2010. Carol Schleif of BMO Family Office stated, "The recent market correction is textbook, especially as there has been unusually low volatility in recent months." Historically, August is a volatile month, dominated by lower trading volumes and summer lulls. With the global decline in demand for safe assets, yields on U.S. government bonds fell, facilitating an auction of $58 billion in three-year bonds. Traders are now adjusting their expectations for significant interest rate cuts by the Federal Reserve. Currently, 105 basis points of relief are forecasted, compared to 150 basis points on Monday. David Donabedian of CIBC Private Wealth US emphasized, "The Fed is concerned about systemic risks, not disappointed investors. Therefore, it will not change its course due to a market correction." He added that a slowdown in growth is more likely than a recession. The S&P 500 rose to 5,240 points, led by a 3.8% increase in Nvidia. The "Magnificent Seven" index of megacaps and the Russell 2000 of smaller companies both gained 1.2%. Airbnb fell in late trading due to a weak forecast, while Super Micro Computer posted a solid revenue outlook driven by investments in AI technology. The yield on the 10-year U.S. Treasury rose by 10 basis points to 3.89%, while the Japanese yen weakened after a recent rise. Bitcoin gained, while the oil price fell following five weeks of decline, attributed to reports of increased U.S. inventories. Markets returned to some calm on Tuesday after weak economic data and disappointing technology results had dampened sentiment. The S&P 500 was approaching an 8.5% decline from its highs, nearly amounting to a correction. George Smith of LPL Financial explained, "Historical data shows that declines of 10% or more are a normal and healthy part of a bull market." Such corrections are typical and not a cause for panic. Ben Kirby of Thornburg Investment Management added, "Excesses are being reduced. It doesn't feel good, but it is a healthy process." Lauren Goodwin of New York Life Investments emphasized that volatility must be accepted. Savita Subramanian of Bank of America Corp. viewed high-quality stocks as the best hedge against market fluctuations. Michael Sansoterra of Silvant Capital Management stated, "Long-term investors need not worry about short-term fluctuations. Such market corrections are occasionally necessary and keep investors honest.