(News Bulletin 247) – After having tumbled by 12.4% on Monday, the Nikkei recovered by more than 10% this Tuesday. The Chinese stock markets were also in the green in the first trading.

Asian stock markets were up on Tuesday, particularly Tokyo’s, which started off with a strong rebound the day after a historic fall amid fears of a recession in the United States and a sharp rise in the yen in the wake of monetary tightening in Japan. The leading Nikkei index, after having plummeted by 12.4% the day before, climbed by 10.02% to 34,610.65 points around 00:50 GMT, and the broader Topix index gained 10.05% to 2,451.08 points.

“Today, Japanese markets are likely to start the day with a significant gain, with the yen weakening against the dollar, in addition to a reaction to yesterday’s sharp decline,” Toshiyuki Kanayama commented in a note from Monex. “Interestingly, the yen, which played the role of the villain in yesterday’s spectacular sell-off, could become today’s hero, offering a potential lifeline amid the ongoing volatility,” said Stephen Innes of SPI Asset Management.

The Tokyo stock market experienced a “black Monday” the day before, suffering the biggest drop in points in its history due to the combined effect of the slowdown in the American economy and the unwinding of a speculative movement called a “carry trade” on the yen. This movement consists of borrowing money in the currency of a country whose central bank charges low rates to invest it in a currency with higher yields. The yen had not experienced such an appreciation in a session since December, when speculation about the end of negative rates by the BoJ was rife.

Dow Jones’ worst session since 2022

“The decline in Japanese stocks yesterday wiped out all the gains made by the Nikkei and Topix since the beginning of the year,” said Takuma Ikemoto of Tokai Tokyo Intelligence Lab. Chinese stock markets were also in the green in early trade. Hong Kong’s Hang Seng index was up 1.05 percent in early trade at 16,873.04 points, Shenzhen’s gained 0.43 percent to 1,563.03 points and Shanghai’s gained 0.06 percent to 2,859.02 points. Taiwan’s Taiex index gained 0.84 percent and Seoul’s Kospi was up 3.07 percent.

Global markets followed Tokyo’s lead, including Wall Street, where the Dow Jones saw its worst session since 2022 and where the VIX index, known as the “fear index” because it measures market volatility, climbed during the session to its highest since March 2020 when the Covid-19 pandemic broke out. Stocks rebounded in all directions in Tokyo after some suffered their worst session in history on Monday: SoftBank Group climbed 9.8%, Nintendo 10.2%, Sony 8.7% and Mitsubishi UFJ Financial Group 13.5%. The dollar rose to 145.93 yen around 0010 GMT, compared to 144.18 yen on Monday at 2100 GMT.

The euro also rose to 159.76 yen against 157.90 yen the day before, and was worth 1.0948 dollars against 1.0952 dollars on Monday. Oil prices were in the green: the price of a barrel of American WTI rose 1.85% to 74.29 dollars and that of Brent from the North Sea rose 1.64% to 77.55 dollars around 00:30 GMT.