After the largest drop in history yesterday, the Japanese stock market rebounded and hit the fuse again today, with a big up and down market. There are multiple factors for the rebound of the Japanese stock market today, including positive news from the US ISM service PMI, the end of arbitrage trading, and Japan's weak consumption that may undermine the Bank of Japan's confidence in rate hikes. The Nikkei 225 index futures rose again today. The Nikkei 225 and TOPIX indices rose more than 10% at one point.
On Tuesday, after the horrific large-scale sell-off on Monday, the Japanese stock market opened sharply higher. The Nikkei 225 index futures rose again today and hit the fuse once again. The Nikkei 225 and TOPIX indices rose more than 10% at one point.
Analysts have offered different explanations for this rollercoaster-like market.
Some people believe that investors have gradually calmed down from the panic caused by the impending recession of the US economy, leading to adjustments in their investment strategies for Japanese stocks and other Asian markets.
On Monday, the US ISM service PMI for July rebounded to 51.4, in line with market expectations. The employment index jumped 5 points to 51.1, suggesting that the weak state of the US labor market may have been overstated in last week's non-farm payroll report.
Callie Cox, an analyst at Ritholtz Wealth Management, analyzed the US economy and said that it is not yet in crisis, but it is indeed in a dangerous zone. The Fed needs to be alert to the risks in the labor market, and although there are no real problems at present, the situation is deteriorating, and the Fed may fall behind reality once again.
On the other hand, the rebound of the Japanese stock market on Tuesday may also be related to the gradual easing of arbitrage trades.
Chris Weston, director of research at Pepperstone, predicted before the Japanese stock market opened on Tuesday that the shocking historical trend in Asian markets on Monday was mainly due to a large-scale clearing of margin positions. Therefore, he expected a strong rebound in the market after it opened on Tuesday.
However, he also warned that major Japanese banks have suffered heavy losses after such violent leverage adjustments, and only the bravest may dare to enter the market now.
In addition, the Japanese market is also affected by adjustments to the country's economic outlook. The household spending data released on Tuesday morning shows that Japanese household spending in June fell 1.4% year-on-year, exceeding the expected decline of 0.9%.
This data may again confirm the trend of weak Japanese consumption, which may exert pressure on the Bank of Japan's rate hike actions. The hawkish statement from the Bank of Japan was the biggest reason for the Japanese stock market's plunge that began last Thursday. If there are new events that constitute obstacles to rate hikes in the future, Japanese market investors may feel slightly more at ease.
Various factors have converged to push the Japanese stock market's opening rally today, but analysts have also emphasized that the stock market has entered a relatively weak stage. Business analyst Jill Schlesinger pointed out that most stock market indices hit new highs in mid-July, after which people became very concerned about the possibility of consumer spending bursting the stock market bubble.
The trading department of JPMorgan stated that as the global stock market sell-off intensified on Monday, the rotation of technology stocks may have been mostly completed, and the market may now be approaching a tactical opportunity to buy at the dip.
Editor/Lambor