The Bank of Japan (BOJ) has taken a decisive step to calm financial markets, with Deputy Governor Shinichi Uchida stating that the central bank will not raise interest rates when markets are unstable. This announcement has led to a significant rebound in global stock markets, following a period of intense volatility.The impact was immediately felt in currency markets, with the yen weakening against the dollar. The dollar jumped 1.8% to 146.84 yen, potentially opening the door to another upleg towards the 150-yen level. This weakening of the yen has been a key factor in supporting Japanese stocks, especially exporters.Stock markets across the globe showed signs of recovery:- In Japan, the Nikkei-225 index rebounded 2.8% after falling 3% earlier in the day.
– European stock markets rallied sharply, with the Euro Stoxx 50 rising 1.48% to 4,643.10 points.
– US stock futures turned positive, with Nasdaq futures rising 1.1%.Analysts attribute the recent market volatility to a combination of factors, including weak economic data and ongoing concerns about the global economy. The VIX index, a measure of market volatility, fell 16% to 32.3, a significant decrease from its record high of 65.50 set the previous day.Despite the challenges, some experts remain optimistic about the US economy. As Oliver Blackbourn, portfolio manager at Janus Henderson, noted, “The silver lining is that, while the current volatility might be painful, a reset after a period of excessive optimism could lead to a healthier market”.However, concerns persist. The market is currently pricing in 103 basis points of easing during 2024, with a 65% chance for a 50 basis point rate cut at the September meeting. This suggests ongoing uncertainty about the economic outlook.As the situation continues to evolve, investors and analysts will be closely watching for further signals from central banks and economic indicators to gauge the direction of global markets in the coming months.
Key points
- Bank of Japan Deputy Governor Shinichi Uchida stated the central bank won’t raise rates when markets are unstable, leading to a global stock market rebound.
- The yen weakened against the dollar, potentially supporting Japanese exports and stocks.
- Global stock markets showed signs of recovery, with increases in Japanese, European, and US indices.
- Market volatility has decreased, but concerns about the global economic outlook persist.
Contradictions👾While some analysts are optimistic about a ‘healthier market’ following the reset, others point to ongoing economic uncertainties and the market pricing in significant easing in 2024.
