financetom
World
financetom
/
World
/
MORNING BID ASIA-Taking stock of Japan's historic market crash
News World Market Environment Technology Personal Finance Politics Retail Business Economy Cryptocurrency Forex Stocks Market Commodities
MORNING BID ASIA-Taking stock of Japan's historic market crash
Aug 5, 2024 3:10 PM

Aug 6 (Reuters) - A look at the day ahead in Asian

markets.

Asian markets open on Tuesday still reeling from a wild session

on Monday that saw Japan's second-biggest stock crash ever spill

over into world markets, helping to unleash a wave of volatility

usually associated with major crises.

The curious thing is though, there's no smoking gun that

explains the scale of the selloff, either in Japan or globally.

At least not a singular or obvious one.

Yes, the yen carry and other leveraged trades were probably

overcooked, the Bank of Japan was maybe too hawkish and is now

headed for a policy error, ditto the Fed by not cutting rates

last week, and the AI-inflated Big Tech bubble on Wall Street

was well overdue a reversal.

But is that enough to warrant a 12% plunge in Japanese

stocks - a fall only exceeded by the 15% slump on Oct. 20, 1987

after Black Monday - or the surge to 65.0 on the U.S. VIX

volatility index, a level only ever topped in the market

meltdowns of 2008 and 2020?

Perhaps.

But there's a case to make that it's excessive. On the

economic side, there's no obvious sign of collapse - Japanese

and U.S. services purchasing manager index numbers on Monday

showed pretty solid growth.

Indeed, the U.S. services PMI data was enough to push

short-dated Treasury yields higher on Monday, halting the recent

decline that had also reached historical magnitudes.

This is the febrile atmosphere traders in Asia on Tuesday

will received the Reserve Bank of Australia's latest policy

decision, inflation figures from Taiwan and the Philippines, and

more corporate results from Japan.

The RBA is widely expected to hold rates at 4.35% but could

the current turmoil force a cut? Traders are putting a one-in-10

probability on it.

It remains to be seen whether the current volatility proves

to be a market-centric episode wiping out leveraged trades

across a range of assets without spilling over into the "real"

economy, or something more serious.

There have already been calls in some quarters for an

emergency, inter-meeting Fed rate cut and earlier on Monday U.S.

rates markets had begun to price in the possibility of just that

or a 75 basis point cut next month.

But unless there is a clear deterioration in the economic

data or deeper market dislocation, this is unlikely. By the U.S.

close on Monday that pricing had eased and the VIX index had

halved from its peak.

Classic "safe haven" assets gold and two-year Treasuries

ended lower, although the yen hit a seven-month high. It has

rallied around 13% in three weeks, virtually wiping out its

year-to-date losses.

Further signs of yen stress and dislocation may come from

the cross-currency basis market, a gauge of funding costs and

demand for dollars. Traders will be watching.

Here are key developments that could provide more direction

to markets on Tuesday:

- Australia interest rate decision

- Philippines inflation (July)

- Taiwan inflation (July)

Comments
Welcome to financetom comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
Related Articles >
MORNING BID AMERICAS-Dollar surges after central bank barrage, Apple bruised
MORNING BID AMERICAS-Dollar surges after central bank barrage, Apple bruised
Mar 22, 2024
A look at the day ahead in U.S. and global markets from Mike Dolan The U.S. dollar seems to have emerged a clear winner from the week's magical mystery tour of world central banks - with record high Wall St and world stocks getting a shot across the bow from Apple's ( AAPL ) antitrust bust. A whistle stop look...
European shares set for weekly gains; UK's Phoenix soars
European shares set for weekly gains; UK's Phoenix soars
Mar 22, 2024
* German business sentiment rises in March - Ifo * UK's Phoenix tops STOXX on upbeat outlook & results * Legal & General ( LGGNF ) up on shelving China business licence plan * STOXX 600 up 0.1% (Updated at 0918 GMT) By Shubham Batra March 22 (Reuters) - European shares were largely flat on Friday but maintained record highs...
China yuan slides to four-month low, state banks step in
China yuan slides to four-month low, state banks step in
Mar 22, 2024
(Updates to market close) SHANGHAI, March 22 (Reuters) - China's yuan declined to a four-month low against the dollar on Friday, breaching a key threshold and prompting state-owned banks to step in to defend the currency. In the spot market, the onshore yuan fell to the weak side of the psychologically important 7.2 per dollar level to hit a low...
DIARY-Europe's STOXX 600 corporate earnings week ahead
DIARY-Europe's STOXX 600 corporate earnings week ahead
Mar 22, 2024
March 22 (Reuters) - Diary of Europe's STOXX 600 (.STOXX) corporate earnings for the week ahead EUROPE'S STOXX 600 EARNINGS Company Event Name Start Date Start Time RIC Name (GMT) 25-Mar-2024 13:00 IMI.L IMI PLC IMI PLC Retail Investor Webinar 25-Mar-2024 07:00 KGF.L Kingfisher PLC Full Year 2024 Kingfisher PLC Earnings Release 26-Mar-2024 NTS HRA.MI Hera SpA Q4 2023 Hera...
Copyright 2023-2026 - www.financetom.com All Rights Reserved