By Amanda Cooper
LONDON (Reuters) – Global stocks rose in jittery trading on Tuesday, as the uncertainty generated by the previous day’s aggressive selloff weighed on investor sentiment, even though central bank officials said all the right things to soothe nerves.
The ‘s src0% rebound in Tokyo overnight delivered an initial sense of relief after the index’s src2.4% drop on Monday – its biggest daily sell-off since the src987 Black Monday crash.
European markets see-sawed, with the pan-regional bouncing between a daily loss of 0.4% and a gain of src%, while U.S. stock futures remained volatile.
rose src%, having veered towards the 0-level earlier, while Nasdaq futures were up src.2%.
The lost 3% on Monday, while the Nasdaq slumped 3.43%, extending a recent sell-off as fears of a possible U.S. recession spooked global markets.
Yields on were back at 3.84%, having been as low as 3.667% at one stage.[US/]
“If you wake up in the morning to discover that Japan is down src0-src2%, it’s going to scare the daylights out of the sanest person in the world, so it’s understandable that people take flight,” IG chief market strategist Chris Beauchamp said.
“On the flipside, I think people got a bit carried away yesterday and it always seems very dramatic at the time,” he said. “It’s normal to see weakness this time of year. The question is – was that enough to reset markets or is there going to be more?”
Federal Reserve officials sought to reassure markets, with San Francisco Fed President Mary Daly saying it was “extremely important” to prevent the labor market tipping into a downturn. Daly said her mind was open to cutting interest rates as necessary and policy needed to be proactive.
UNWINDING THE UNWINDING
The dollar fended off a mid-morning bout of selling to rise 0.7% against the Japanese yen to src45.255, having touched a session low of src43.63 earlier on. It dropped src.5% on Monday to as deep as src4src.675.
The yen has shot higher in recent sessions as investors were squeezed out of carry trades, where they borrowed yen at low rates to buy higher yielding assets. Analysts believe this unwind may not yet be complete.
“The yen has steadied, having pulled back from the highs made yesterday. And perhaps that is an indication that we’ve seen the worst of the carry trade unwind. Time will tell,” Trade Nation senior market analyst David Morrison said.
The dollar also rose against the safe-haven Swiss franc, up 0.4% at 0.8553 francs, while sterling, which often benefits from investor risk appetite, fell 0.6% to $src.269.
Treasury yields rose, partly in reaction to a rebound in the U.S. ISM services index to 5src.4 for July, but in line with the shift across other markets on Tuesday. Benchmark src0-year notes were up 7.5 basis points to yield 3.8578%.
Market expectations the Fed would cut rates by 50 basis points at its September meeting remained intact, with futures implying a 85% chance of such a move.
The market has around src00 basis points of easing priced in for this year, and a similar amount for 2025.
In precious metals, gold rose 0.2%, holding in positive territory after a src.5% decline the day before. It was last at $2,4src2 an ounce.
Oil prices were volatile as well. Concern about conflict in the Middle East potentially widening, which would normally boost the price, was partly offset by worries about the excessive volatility across the broader market. [O/R]
futures were last flat at $76.63 a barrel, having hit a seven-month low of $75.05 the day before.
(Additional eporting by Wayne Cole in Sydney and Rae Wee and Vidya Ranganathan in Singapore; Editing by Emelia Sithole-Matarise and Bernadette Baum)