Asian stocks resume slide in rollercoaster trade: Markets mixed

(Bloomberg) — Stocks in Asia fell again after a frenzy of dip buying fueled a rally in most markets around the world on Tuesday. US futures fell in early trading.

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Stock benchmarks fell in Japan and Australia, while futures pointed to modest gains in Hong Kong. The S&P 500 and Nasdaq 100 rose on Tuesday – following a Japan-led rally in Asia – with both rising 1% following a global meltdown. Wall Street’s “fear gauge” – the VIX – recorded its biggest drop since 2010.

Both the Nikkei and Topix are down about 18% from their highs reached last month after entering a bear market on Aug. 5 when losses exceeded 20%. The yen fell for a second day after a recent rally.

The dollar and Treasuries were steady in early trading in Asia.

“The critical element for Japanese stocks and, as we have seen, global stocks, is the strength of the yen, which is itself an expression of the U.S. economic outlook,” said Kyle Rodda, senior market analyst at Capital.Com. “For now, the USDJPY is hovering around 145. If it remains fairly non-volatile and perhaps rises, it will support a Nikkei recovery and a return to normalcy.”

The government and the Bank of Japan agreed to closely monitor developments in the economy and financial markets with a sense of urgency, said Deputy Finance Minister for International Affairs Atsushi Mimura following a meeting between the Ministry of Finance, the BOJ and the Financial Services Agency.

10-year Treasury yields remained steady after jumping 10 basis points to 3.89% on Tuesday. Investors are also tempering expectations for deep rate cuts from the Federal Reserve this year. Swaps point to around 105 basis points of easing, compared with 150 basis points on Monday.

Elsewhere, the New Zealand dollar strengthened after the unemployment rate rose less than expected. Oil fell after an industry report indicated a rise in US inventories after five weeks of declines.

“We would characterize the recent market pullback as a classic correction, following months of low volatility so far in 2024,” said Carol Schleif of BMO Family Office. “The lack of volatility prior to the last few weeks is unusual, and our current correction is quite normal, especially during August, which has historically been a volatile period for markets due to lighter trading volumes and the summer slump.”

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The S&P 500 rose to 5,240. Nvidia Corp. jumped 3.8% to lead chipmakers’ gains. Both the megacap “Magnificent Seven” indicator and the small-cap Russell 2000 rose 1.2%.

A semblance of calm returned to markets on Tuesday after a pullback fueled by weak economic data, dismal technology results, tense positioning and weak seasonal trends. The wall of worry the market has built over the past few days has pushed the S&P 500 to the brink of a correction, down about 8.5% from its highs.

While these sharp declines in stock prices are concerning, historical data shows that “drops, pullbacks and corrections of 10% or more” are a normal and healthy part of any bull market, according to George Smith of LPL Financial.

Approximately 94% of years since 1928 have seen a retracement of at least 5%, and 64% of years have seen at least a 10% correction, he noted.

“We believe the frequency of these occurrences should provide comfort to stock investors, allowing them to be patient, remain invested and, most importantly, not panic,” Smith said.

Main events this week:

• China trade, foreign exchange reserves, Wednesday

• Consumer credit in the US, Wednesday

• Industrial production in Germany, Thursday

• Initial unemployment claims in the US, Thursday

• Fed’s Thomas Barkin Speaks Thursday

• China PPI, CPI, Friday

Some of the main movements in the markets:

Actions

• S&P 500 futures were down 0.4% at 9 a.m. Tokyo time

• Hang Seng futures rose 0.5%

• Japan’s Topix fell 1.4%

• Australia’s S&P/ASX 200 was little changed

• Euro Stoxx 50 futures were little changed

• Nasdaq 100 futures fell 0.7%

Coins

• The Bloomberg Dollar Spot index was little changed

• The euro was little changed at $1.0926

• The Japanese yen fell 0.2% to 144.70 per dollar

• The offshore yuan was little changed at 7.1595 per dollar

• The Australian dollar was little changed at $0.6514

Cryptocurrencies

• Bitcoin fell 0.9% to $56,053.31

• Ether fell 1.1% to $2,462.12

Titles

• The 10-year Treasury yield fell one basis point to 3.88%

• Japan’s 10-year yield rose 14 basis points to 0.885%

• Australia’s 10-year yield rose five basis points to 4.07%

goods

• West Texas Intermediate crude fell 0.4% to $72.88 a barrel

• Spot gold fell 0.3% to $2,384.79 an ounce

This story was produced with help from Bloomberg Automation.

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