Asian stocks rebound, led by Japan shares

Asian stocks rallied on Tuesday, with Japan’s Nikkei leading the gains after a sharp rebound from last week’s volatility.

The yen’s stabilisation contributed to the positive sentiment. Traders are closely watching upcoming US economic data, particularly the inflation report, to gauge the Federal Reserve’s monetary policy direction.

Japan’s Nikkei index surged more than two per cent in early trading, recovering from the previous week’s sell-off triggered by yen appreciation and recession fears.

MSCI’s broadest index of Asia-Pacific shares outside Japan edged higher, while Chinese and Hong Kong markets saw little movement.

“While aftershocks might reveal vulnerabilities, we continue to view recent volatility as being an equivalent of a ‘heart palpitation’ not a ‘cardiac arrest’,” Viktor Shvets, head of global desk strategy at Macquarie Capital said in a note.

Investor sentiment was still delicate, with the yen trading at 147.16 per dollar on Monday, after reaching a seven-month high of 141.675 last week. This is a significant shift from its 38-year lows of 161.96 at the beginning of July.

The Bank of Japan’s (BOJ) surprise interest rate hike last month and subsequent interventions have disrupted carry trade strategies, where investors borrow in yen to invest in higher-yielding assets.

Oil prices retreated three per cent after a significant rally in the previous session, as investors monitored the evolving situation in the Middle East. Gold prices rose amid increased demand for safe-haven assets.

Attribution: Reuters

Subediting: M. S. Salama