Market Bounce: A Ray of Hope or a Temporary Recovery?

Image Credit: Reuters

European investors, still reeling from a near 12% drop over three days in their regional stock benchmark, are waking up to a futures market showing a more than 3% rebound. 

So, what’s driving the shift?

President Donald Trump has remained steadfast in his stance on trade, even escalating tensions with China by threatening additional 50% tariffs, which would push the total tariff rate above 100%. Wall Street had a relatively flat day on Monday, which came as a relief after a sharp 10% drop over the previous two sessions.

What stood out most in Monday's trading was the heightened volatility, with the VIX fear gauge soaring above 60 for only the second time since the pandemic.

This raises questions about the sustainability of the market rebound. Even a 3% recovery in the STOXX 600 wouldn’t make much of a dent in the losses following Trump's "Liberation Day" tariff announcement last Wednesday.

However, a closer look at Asian markets reveals a clear winner: Japan.

In what could signal that Trump's tariffs might just be a starting point for negotiations, Treasury Secretary Scott Bessent is leading a team to discuss trade with Tokyo in the coming days.

There’s also a stark geographical divergence. Japan's stock market has surged by 6%, while Taiwan, facing 32% tariffs and heavily reliant on chip exports, saw a 5% drop. Other Asian emerging markets have taken some of the hardest hits, with steep tariff rates exacerbating the downturn. Thailand’s benchmark index has fallen to a five-year low, and after a week-long break, Indonesia's stock market plummeted by 9%, with the rupiah hitting a record low.

Paraphrasing text from "Reuters" all rights reserved by the original author