Ritika Janiya
FTSE 100 and European stocks see-sawed between gains and losses on Tuesday, with the main London index managing a rise. The US and Japanese markets had strong rebounds after big falls. The US trade deficit shrank on higher exports. The Bank of England said the big UK banks now have enough reserve capital to avoid government bail-outs in the event of another financial crisis.
The FTSE 100, which tracks the largest London Stock Exchange companies, was a bit of a rollercoaster ride Tuesday and ended in positive territory. There were also substantial recoveries from sharp declines in the US and Japan. Below, a closer look at how these markets did will be discussed.
FTSE 100 and European Markets
The FTSE 100 yo-yoed Tuesday, finishing 0.5% higher. It followed what experts called a “turbocharged turnaround” in Asian markets, particularly in Japan. Germany’s DAX index was up 0.2%, while France’s CAC 40 fell slightly by 0.1%. The pan-European STOXX 600 rose 0.4%.
US Markets Bounce Back
U.S. equities markets partially made up for Monday’s losses on the domestic front. The Dow Jones Industrial Average rose 0.8%, while both the S&P 500 and the Nasdaq climbed 1.3%. This rebound was not as strong as in Japan, where the Nikkei 225 had its best day since 1987 with a 10% surge.
Currency Movements
The pound changed hands at 1.2703 against the U.S. dollar, and slid 0.63 percent against the dollar but climbed 0.65 percent versus the euro.
Japan’s Stunning Bounce
Japan’s Nikkei 225 made a stunning comeback as it closed 10 percent higher. This was after the index plunged the most since 1987 on Monday. The said recovery was fueled by optimism among investors after an intervention from the Bank of Japan.
U.S. Trade Deficit Shrinks
The trade deficit of the US decreased to $73.1 bln in June from $75 bln a month earlier. It was supported by a 1.5% gain in exports, which climbed to $265.9 bln. Imports increased by 0.6% to $339 bln on higher imports of drugs, computer chips, and telecommunications gear. Oil imports declined, however.
UK Banks’ Crisis Preparedness
The Bank of England said major UK banks were now more able to withstand financial crises. It stress-tested eight major banks and building societies to assess whether or not they could collapse without the need for a government bailout. All institutions under review have made significant progress and will continue to operate, with any cost of failure being borne by shareholders and investors—not public funds.
Wall Street’s Turnaround Tuesday
After a notable three-day decline, the US markets opened higher on Tuesday. The Nasdaq and S&P 500 were leading the gains, having opened about 0.6% and 0.5% higher respectively, while the Dow Jones Industrial Average traded barely above the flat line.
Investor Sentiment
Markets seemed to rebound, and investor sentiment improved. The rapid recovery in Japan, together with a positive move in the US, were some relief after a tumultuous period. However, analysts warn that the volatility may not be quite over.
JP Morgan’s Analysis
A JP Morgan analysis indicates that the mayhem currently experienced in the markets may be only half way. The unwinding of carry trades, especially those involving the yen, is seen as only 50%-60% complete, indicating that more market normalization can be expected.
The market action on Tuesday was checkered, with some marked bounces developing in both the US and Japan. The FTSE 100 finished the day in positive territory after a real see-saw session. Meanwhile, the US trade deficit narrowed more than expected, and the Bank of England revealed that UK banks were far better prepared for a crisis than thought. But despite these bits of good news, experts are still alerting that the market’s recovery may be some way off yet. Be informed, be vigilant—further turbulence may lie ahead.
Key Takeaways:
The FTSE 100 ended the day up 0.5%, but it has been a real rollercoaster.
US markets bounced back; so Dow Jones, the S&P 500 and the Nasdaq all rose.
Japan’s Nikkei 225 soared by 10%, its highest ever rise after Monday’s massive slump.
US trade deficit shrank in June as exports grew.
Big UK banks more resilient to crises, Bank of England says.
It serves to summarize the snapshot of how markets performed and what one should look out for in the future. Investors have to keep an eye on all developments going forward if they are to navigate this financial landscape.
