Japanese Stocks Poised for Recovery: Expectation of Positive Signals After Global Sell-off

After a significant setback on Monday, which caused billions in losses in financial markets from New York to London, positive signals are emerging for Japanese stocks. U.S. stock futures climbed in early trading, indicating a potential recovery. The Nikkei 225 is expected to rise by over 6% on Tuesday after suffering a 12% drop in yen terms on Monday – its worst daily loss since 1990. In Hong Kong and Sydney, markets are stabilizing, suggesting a pause following dramatic losses. On Wall Street, the S&P 500 posted a 3% decline, while the Nasdaq 100 experienced its worst start to a month since 2008. However, futures indicate a possible recovery for both indices at the U.S. market opening. Fears of an impending U.S. recession led to an abrupt shift that overturned the previously optimistic sentiment induced by the Federal Reserve’s anticipated rate cuts. Speculations about a recession – now considered premature – weighed on the market, despite the decreasing likelihood of an emergency rate cut by the Fed. “We don’t see a crisis today, but we are in a danger zone,” commented Callie Cox of Ritholtz Wealth Management. “It could soon become fragile if the Fed doesn’t give more attention to the labor market situation.” Yields on two-year U.S. Treasury bonds declined after a brief recovery; the dollar showed weakness, and Bitcoin fell by 10%. The sell-off waves in Japan may subside after a panic sale led the Topix to drop by 12%, resulting in a historic three-day loss. The Bank of Japan’s stricter monetary policy drew worldwide criticism and caused significant turbulence. The predicted increase in bearish market forecasts materialized, including from Mislav Matejka of JPMorgan Chase and Michael Wilson of Morgan Stanley. Veterans like Ed Yardeni recalled the 1987 market crash, which occurred without a subsequent recession. In this context, Keith Lerner of Truist Advisory Services stated, “A decline was to be expected after such a strong recovery, but the bull market remains intact.” Nonetheless, Tony Pasquariello of Goldman Sachs Group advised reducing risk, while Michael Gapen of Bank of America emphasized that the markets had outpaced the Fed and aggressive rate cuts were unnecessary. Meanwhile, a tactical buying opportunity for technology stocks might be emerging, according to JPMorgan Chase. In Australia, the central bank indicates that it is likely to keep its key interest rates stable, while locally high inflation continues to pose a challenge. Oil prices recovered following production halts in Libya, drawing attention to the Middle East.