Stock Market Today: Dow up 400 points, Nasdaq adds 1.8% as markets extend risk-appetite rebound
A top Bank of Japan official on Wednesday was credited with helping to further soothe investor nerves after he indicated policymakers would pay heed to market conditions when they consider further rate increases.
That may also put the onus on the Federal Reserve to lay groundwork for an eventual signal rate cuts are on the way to secure a soft landing, argued Krishna Guha, head of the global policy and central bank strategy team at Evercore ISI, in a note.
Speaking to business leaders in northern Japan, Deputy Gov. Shinichi Uchida said Japan isn’t in the same position as the U.S. and Europe a few years ago when central banks there aggressively hiked interest rates. “Therefore, the bank will not raise its policy interest rate when financial and capital markets are unstable,” he said, according to the Wall Street Journal.
Hawkish remarks by Uchida’s boss, BOJ Gov. Kazuo Ueda, on July 31 followed an unexpected rate hike and were blamed for contributing to a global equity rout.
Uchida’s remarks were credited with helping a further recovery in Japanese stocks, after the Nikkei 225 on Monday saw its biggest one day drop since 1987, and saw the Japanese yen soften. The unwind of the Japanese yen carry trade was blamed for volatility across global markets. U.S. stocks fell sharply on Monday, with the S&P 500 suffering its biggest one-day drop in nearly two years. Stocks have recovered a chunk of those losses and futures pointed to a higher start on Wall Street Wednesday morning.
“We think this means no further BOJ hike before December at the very earliest and probably likely not before 2025, and further much more careful tightening possible only upon reassurance the U.S. is going to avoid recession, with no further hikes on this cycle if the U.S. were to fall into recession,” Guha wrote.
“But we would now look to the Fed to lean in a bit more in the coming days to build the bridge to Jackson Hole and a definitive signal from [Chair Jerome] Powell that the Fed will pull forward some easing to secure the soft landing, the extent of which will be determined by the next set of labor data,” he said.
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