Shares advanced Wednesday in Asia, with Japan’s benchmark Nikkei 225 index closing 1.2% higher after a Bank of Japan official suggested the central bank would refrain from raising interest rates at times of market volatility.
U.S. futures gained and oil prices edged lower.
The Nikkei index bounced during the day but ultimately gained more than 400 points to close at 35,089.62. It soared more than 10% on Tuesday, recovering a large share of the losses it suffered Monday, its worst day since 1987.
The gains followed remarks by a Bank of Japan official who noted that even though the central bank had raised interest rates a week earlier, to 0.25% from 0.1%, monetary policy remains lax.
The interest rate hike, however modest, set in motion a domino effect of selling by traders to adjust to higher costs for carry trades — a favorite trade for hedge funds and other investors — due to higher interest rates and a rise in the value of the Japanese yen against the U.S. dollar. That accentuated the scale of the declines, especially in Tokyo.
Speaking to business leaders in the northern island of Hokkaido, Shinichi Uchida, a BOJ vice governor, acknowledged recent market turmoil, triggered in part by concerns over the outlook for the U.S. economy, and said he believed the U.S. would have a “soft landing,” avoiding a recession.
Japan’s central bank can afford to wait, he said, and “will not raise its policy interest rate when financial and capital markets are unstable.”
Uchida’s comments “acted like a financial security blanket, calming jittery markets and effectively signaling continued protective intervention,” Stephen Innes of SPI Asset Management said in a commentary.
The dollar rebounded against the yen early Wednesday, jumping to 146.51 yen from 144.32 late Tuesday. A weaker yen tends to help profits of export manufacturers that earn most of their revenue overseas, and the yen had surged after the rate hike last week after trading recently at a near four decade low level of 160 yen to the dollar.
Also Wednesday, China reported that its exports rose 7% in July from a year earlier. That was well below the near-10% forecasts of most economists and the slowest rate of growth in three months. It also reflected a low base. Exports jumped 8.6% year-on-year in June, much more than expected.
Hong Kong’s Hang Seng erased early losses and rose 1.2% to 16,849.74. The Shanghai Composite index gained 0.1%, to 2,869.83.
South Korea’s Kospi jumped 1.8% to 2,568.41 and the benchmark in Taiwan jumped 3.9% — both markets were among the biggest losers in Monday’s sell-offs due to heavy weighting of technology shares that have seen the biggest losses in the past few weeks.
The S&P/ASX 200 in Australia rose 0.3% to 7,699.80.
On Tuesday, the S&P 500 climbed 1% to break a brutal three-day losing streak. It had tumbled a bit more than 6% on a raft of concerns, including worries the Federal Reserve had pressed the brakes too hard for too long on the U.S. economy through high interest rates in order to beat inflation.
The Dow added 0.8% and the Nasdaq gained 1%.
Stocks of all kinds climbed in a mirror opposite of the day before, from smaller companies that need U.S. households to keep spending to huge multinationals more dependent on the global economy.
While fears have risen that the U.S. economy might be slowing too quickly, it is still growing. Many economists see a recession in the next year or so as unlikely. The U.S. stock market is also still up a healthy amount for the year so far, and the Federal Reserve says it has ample room to cut interest rates to help the economy.
The S&P 500 has romped to dozens of all-time highs this year and is still up nearly 10% so far in 2024, in part due to a frenzy around artificial-intelligence technology. Critics have been saying that euphoria has sent stock prices too high in many cases.
In other dealings Wednesday, U.S. benchmark crude oil picked up 2 cents to $73.22 per barrel. Brent crude, the international standard, added 5 cents to $76.53.
The euro fell to $1.0926 from $1.0928.
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