Global Markets Rebound After Recent Turbulence
- Global markets experience a rebound after recent tumultuous events.
- Bank of Japan's interest rate hike and US jobs report sparked initial fears of recession.
- Investors are optimistic as stocks and bond yields recover from the plunge.
The yen carry trade, where investors borrow low-interest yen to invest in higher-yield assets, is facing challenges as recent economic indicators shift. A disappointing July jobs report in the U.S. raised recession concerns, leading to significant declines in U.S. stocks and bond yields. However, a series of positive economic data this week has allowed the market to recover, with the benchmark index regaining all of last week’s losses and showing gains for the month. Analysts from Ned Davis Research have expressed optimism, stating that the bull market remains intact. As the Federal Reserve prepares to assess the July Personal Consumption Expenditures price index and other inflation metrics before its policy meeting on September 18, traders are speculating about a potential interest rate cut. Despite some central bank officials advocating for a cautious approach, recent data suggests a cooling inflation trend, prompting traders to adjust their expectations for a half-point cut from 51% to 30%. The Russell 2000 index, which reflects small-cap stock performance, has surged by 2.5% this week, fueled by hopes of a rate reduction. Ahead of the Fed's meeting, Chair Jerome Powell is scheduled to speak at an economic summit in Jackson Hole, Wyoming. In corporate news, Walmart's shares have risen by 7.7% following strong sales reports, while Home Depot's stock has dipped by 2.2% after the company lowered its sales forecasts.