Nikkei 225 on the Rise – Markets Calm Down After Turbulent Start to the Week

The Asian stock markets are coming to life, led by Japan’s benchmark Nikkei 225. After a turbulent Monday reminiscent of the 1987 crash, the Nikkei rose by an impressive 10 percent on Tuesday. Additionally, other Asian markets appear to have overcome the initial turmoil. Monday was marked by an international plummet in stock prices, triggered by concerns over a slowing US economy. The Nikkei initially gained nearly 11 percent, then fell back, ultimately closing 8.7 percent higher at 34,211.83 points. Investors took the opportunity to snap up bargains following the previous day's 12.4 percent drop. Heavy losses were also recorded on Wall Street on Monday: the S&P 500 fell by 3 percent, the Dow Jones Industrial Average lost 1,033 points (2.6 percent), and the Nasdaq Composite dropped 3.4 percent, including significant tech companies like Apple and Nvidia, which were under substantial pressure. The US labor market data from Friday heightened concerns about the Federal Reserve's stringent interest rate policy, leading to the global declines. Despite these shocks, some Asian markets rebounded on Tuesday. The Hang Seng Index in Hong Kong rose by 1.1 percent, the Kospi in South Korea improved by 3.5 percent, and the Shanghai Composite Index edged up by 0.2 percent. Market status reports reflected fears of continued interest rate hikes and concerns over a potential emergency rate cut by the Fed. The two-year Treasury yield, significant for Fed expectations, briefly fell below 3.70 percent, later recovering to 3.89 percent. Experts like Brian Jacobsen from Annex Wealth Management and JJ Kinahan from IG North America warned against overreactions, citing technical factors and waning enthusiasm for artificial intelligence as reasons for the strong market volatility. They also highlighted that the US economy is still growing overall, making the necessity for an emergency rate cut questionable. Nevertheless, major tech stocks continued their downward trajectory, including Apple, Nvidia, and Alphabet. A ruling against Google's search engine practices and weak earnings reports exacerbated the pessimistic sentiment. Apple fell after Berkshire Hathaway reduced its shareholding, Nvidia dropped 6.4 percent over reports of a delayed AI chip release, and Alphabet decreased by 4.4 percent following an adverse court ruling. Despite all uncertainties, corporate earnings growth expectations remain high. Additionally, the Bank of Japan and its interest rate hike have global implications, while the US services sector performed better than expected. Alongside economic concerns such as interest rates and corporate earnings, geopolitical uncertainties like the Israel-Hamas conflict and the upcoming US elections are weighing on the markets.