Asia’s Nikkei 225 index has rebounded strongly, closing around 10% higher after experiencing its biggest crash since 1987 on Monday. The index recovered much of the previous day’s 12.4% slump, ending the day up 3,217 points or 10.3% at 34,675 points. South Korea’s KOSPI index also rose by 3.7%, while Australia’s S&P/ASX 200 saw a modest 0.4% increase.
The recent stock market turbulence has been attributed to concerns about a looming US recession and the end of the cheap money era, with rising volatility exacerbating the situation. Stephen Innes, managing partner at SPI Asset Management, highlighted multiple factors contributing to the market instability, including issues with the yen carry trade and overinflated tech bubble on Wall Street.
Despite fears of a recession, strong service sector data and comments from Chicago Fed Bank president Austan Goolsbee suggesting that a recession is not imminent provided some relief to the markets. The US Federal Reserve is expected to cut interest rates in September to support economic growth and prevent a further decline in the equity market.
The Nikkei’s recovery on “turbocharged turnaround Tuesday” indicates a potential bounce back in European markets and Wall Street. Analysts are cautiously optimistic about the future, with Germany’s improving factory orders and Australia’s Reserve Bank leaving interest rates unchanged contributing to a more positive outlook. However, there are warnings of potential future turmoil, indicating that the market may still face challenges ahead.
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