Nikkei Soars 9% as Markets Rebound from Selloff

Japan's Nikkei surged 9%, nearly reversing Monday's 12.4% drop, following calming comments from central bank officials. US S&P 500 futures rebounded 1.5% after a three-day 8% decline. European markets are set to rise after the STOXX 600 logged its steepest three-day decline since June 2022.

Equities

The FTSE 100 fell 2.0% to its lowest level since April 22, recording its worst day in over a year. The mid-cap FTSE 250 index dropped 2.8%, hitting its lowest level in more than three months. Water utilities saw the biggest declines, with a 4.0% drop, after Barclays downgraded Severn Trent and Pennon. Energy shares fell 3.2% amid recession fears, while precious metal miners declined 3.3% as gold prices fell.

In the US, major indices faced significant losses. The S&P 500 dropped 3%, the Nasdaq fell 3.4%, and the Dow Jones Industrial Average lost 2.6%. Apple shares plummeted 4.8% after Berkshire Hathaway halved its stake in the company. Nvidia, Microsoft, and Alphabet also saw declines. The Cboe Volatility Index, known as Wall Street's "fear gauge," reached its highest close since October 2020. The Nasdaq and S&P 500 marked their biggest three-day percentage drops since June 2022, closing at their lowest levels since early May.

Chicago Fed President Austan Goolsbee downplayed recession fears but emphasized the need for careful monitoring of the economic environment. Despite weak jobs and manufacturing data raising concerns, a report showed US services sector activity rebounded in July, providing some relief.

Pringles maker Kellanova saw a notable rise of 16.2% after a report indicated that candy giant Mars was considering a buyout. However, the overall market trend was negative, with volume on US exchanges reaching 16.50 billion shares, above the 20-day average of 12.29 billion.

Forex & Commodities

The US dollar faced significant losses on Tuesday, with the yen retreating after a sharp rise due to the unwinding of carry trades and expectations of deep rate cuts from the Federal Reserve. The yen weakened 0.89% to 145.48 per dollar after touching a seven-month high of 141.675. The dollar index, which measures the greenback against six major currencies, was at 102.87, recovering slightly from a seven-month low of 102.15.

Gold prices edged down 0.2% to $2,403.22 per ounce, pressured by a stronger dollar. US gold futures were slightly lower at $2,443.80. Despite expectations of significant rate cuts by the Federal Reserve, gold prices have struggled amidst global market volatility.

Oil prices have tumbled amid concerns about a global economic slowdown. Hedge funds and other money managers sold 117 million barrels in key futures and options contracts over the last week of July. Brent crude futures have fallen below $76 per barrel, marking the lowest levels since the beginning of the year.

The Australian dollar saw a slight increase of 0.44% to $0.6525 after Reserve Bank of Australia Governor Michele Bullock indicated that rate cuts were not imminent. However, the currency remained under pressure, having fallen to an eight-month low of $0.63485 on Monday.

US economic data showed a rebound in the services sector in July, with increased orders and employment, providing some relief amidst ongoing recession fears. The Federal Reserve has indicated the need for rate cuts to prevent an economic downturn, with traders anticipating 110 basis points of easing this year.