Japan’s benchmark stock index resumes swings after calm day on Wall Street

Stocks rose mostly on Wednesday in Asia, with Japan’s benchmark Nikkei 225 index falling shortly after the open and then bouncing as it rose.

The Nikkei index was up 2.3% mid-morning at 35,464.61.

It rose more than 10% on Tuesday, recovering much of the losses suffered with its worst day since 1987.

The gains followed comments from a Bank of Japan official who noted that although the central bank had increased interest rate a week earlier, from 0.1% to 0.25%, monetary policy remains loose.

The interest rate increase, although modest, triggered a domino effect of selling by traders to adjust to the higher costs of carry trades – a favorite trade for hedge funds and other investors — due to higher interest rates and the increase in the value of the Japanese yen relative to the US dollar.

The dollar rebounded sharply against the yen on Wednesday morning, jumping to 146.47 yen from 144.44 on Tuesday. A weaker yen tends to help the profits of export manufacturers who earn most of their revenues abroad, and a rise in the value of the yen following the BOJ rate hike led to big gains for the Japanese currency later in the week last.

In recent months, the dollar has traded at a nearly four-decade high of 160 yen.

Unwinding carry trades and concerns about the outlook for the US economy sent markets lower late last week and into Monday’s session.

Elsewhere in Asia on Wednesday, Hong Kong’s Hang Seng was the biggest outlier, giving up 0.3% to 16,647.34. The Shanghai Composite index gained 0.2% to 2,873.25.

South Korea’s Kospi jumped 2.6% to 2,587.78 and the benchmark index in Taiwan jumped more than 3% – both markets were among the biggest losers in Monday’s sell-off due to the heavy weight of technology stocks which have suffered the biggest losses in recent weeks.

YOU&OP/ASX 200 in Australia rose 0.4% to 7,712.20.

On Tuesday, S.&P500 rose 1% to break a brutal three-day stretch series of defeats. It had fallen just over 6% due to a range of concerns, including worries that the Federal Reserve had pumped the brakes too hard and for too long on the US Economy through high interest rates in order to beat inflation.

YOU&OP 500 rose 53.70 points to 5,240.03. The Dow rose 294.39, or 0.8%, to 38,997.66, and the Nasdaq gained 166.77, or 1%, to 16,366.85.

Stocks of all types rose in a mirror opposite fashion to the previous day, from smaller companies that need US families to continue spending to large multinationals more dependent on the global economy.

Stronger-than-expected earnings reports from several major U.S. companies helped buoy the market. Kenvue, the company behind Tylenol and Band-Aids, jumped 14.7% after reporting stronger-than-expected profit thanks in part to higher prices for its products. Uber rose 10.9% after easily beating profit forecasts for the latest quarter.

Caterpillar rose 3% after the heavy machinery maker reported stronger-than-expected earnings.

Although fears about a slowdown in the US economy are growing, they continue to grow and many economists consider a recession next year unlikely. The U.S. stock market also continues to rise a healthy amount year to date, and the Federal Reserve says it has ample room to cut interest rates to help the economy if the job market weakens significantly.

YOU&P 500 has reached dozens of all-time highs this year and is still up nearly 10% so far in 2024, in part due to a frenzy around artificial intelligence technology. Critics have said the euphoria has driven up stock prices in many cases.

In the bond market, Treasury yields rose to recover some of the sharp declines since April, which were driven by growing expectations of future interest rate cuts by the Federal Reserve.

The 10-year Treasury yield rose to 3.88% from 3.78% late Monday. It briefly fell below 3.70% during Monday as fear in the market was rising and investors speculated that the Federal Reserve might even have to call an emergency meeting to quickly cut interest rates.

In other trading Wednesday morning, benchmark U.S. crude oil fell 15 cents to $73.05 per barrel. Brent crude, the international standard, fell 17 cents to $76.31.

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AP Business Writers Stan Choe and Matt Ott contributed.