FirstFT: Asian stocks bounce back

Good morning. We begin in Japan where stocks surged today by their biggest intraday margin since October 2008, leading markets higher across Asia in a striking reversal of yesterday’s global sell-off.

Amid pre-market warnings from traders to expect extraordinary volatility, the broad Topix rose more than 10 per cent as investors began bargain-hunting and the yen stabilised at about ¥144.607 after rising sharply in recent weeks.

The Topix rebound and the 9 per cent resurgence in the narrower, tech-heavy Nikkei 225 Average, came despite heavy overnight falls in US markets including a 3 per cent drop in the S&P 500.

Global markets have fallen in recent days amid fears the Federal Reserve has been too slow to respond to signs the US economy was weakening. Hardest hit, though, have been Japanese stocks, which plunged more than 12 per cent yesterday, days after a surprise Bank of Japan rate rise.

But today’s rebound proved equally eye-catching. At one stage the Nikkei 225 was up 3,453 points — its biggest-ever intraday surge. The rush back into Japan’s equity market was so intense that trading in Nikkei and Topix futures contracts was automatically suspended during today’s morning session. Leo Lewis and Arjun Neil Alim have the full report.

• The Fed: Officials sought to calm market turmoil yesterday, saying the US central bank would move to “fix” any deterioration in the economy, adding that it did not appear to be in recession.

• Explainer: Adam Samson gives a rundown on what is driving the global stock sell-off.

And here’s what else I’m keeping tabs on today:

• Economic data: S&P Global issues July construction PMIs for the Eurozone, France, Germany, Italy and the UK and its services PMI for Ireland. Germany has June industrial orders data, Switzerland has a job market report while the US releases international trade figures. Also, the Bank of England publishes a quarterly update on its gilt sales programme.

• Results: Abrdn, Bayer, International Workplace Group, Keller, Saudi Aramco and Travis Perkins report.

• US elections: Kamala Harris will hold a rally in Philadelphia and is expected to appear with her chosen running mate.

Five more top stories

1. Iranian President Masoud Pezeshkian said yesterday that Tehran would “definitely” respond to Israel in retaliation for the assassination of Hamas’s political leader Ismail Haniyeh. His warning came a day after US secretary of state Antony Blinken told G7 counterparts that Washington was prepared for an “imminent” attack, according to people briefed on the matter.

• Hamas deal: Israeli Prime Minister Benjamin Netanyahu has clashed with his security chiefs over a potential agreement to halt the fighting in Gaza.

• Opinion: Recent events have shown Netanyahu’s priorities. He is prepared to escalate tensions in the region rather than seeking to calm them, writes former UK ambassador to the UN John Sawers.

• UNRWA: The UN agency for Palestinian refugees has sacked nine staff members who may have been involved in Hamas’s October 7 attack on Israel.

2. Abu Dhabi’s sovereign investor Mubadala is pursuing restructurings and management changes in an effort to salvage billions of dollars invested in European start-ups, according to people with knowledge of the strategy. The moves come as valuations of European start-ups have suffered steep declines.

3. Rachel Reeves has left open the door for higher borrowing to fill part of Labour’s “fiscal hole”, as she refused to rule out changing the way the UK’s debt is measured. Analysts say using a different definition of debt to assess whether the government had met its fiscal rules could allow the chancellor to borrow £17bn more without breaking her self-imposed limits.

4. Accused rioters as young as 14 years old appeared in court in the UK yesterday, as the government promised that those involved in recent violent unrest will face “swift justice”. Prime Minister Sir Keir Starmer called for perpetrators to be named and shamed as soon as possible, as he vowed to “ramp up criminal justice”. Read more on the latest government response to the riots.

5. A US federal judge has ruled that Google spent billions of dollars on exclusive deals to maintain an illegal monopoly on search, in a landmark win for the Department of Justice as it seeks to rein in Big Tech’s market power. The 286-page court decision found the company to be a “monopolist” and had violated US antitrust law. Read more on what’s next for the proceedings.

The Big Read

As recently as 2017 Fatih Birol, head of the International Energy Agency, urged the oil industry to pump more oil in order to stave off shortages. But in the past three years he has become increasingly blunt about the world’s need to switch from fossil fuels to clean energy. Birol’s change of approach has led some oil executives to privately suggest that he is playing climate politics and that the IEA is now partisan.

We’re also reading . . . 

• European defence: Whatever the outcome of the US elections, European governments will have to take more responsibility for their own security, writes Philip Stephens.

• Carbon ‘insets’: The certificates help tackle emissions by tracing reduction along a supply chain instead of offsetting it with unconnected activity like planting trees, writes Brooke Masters.

• Economists Exchange: Martin Wolf discusses with businessman and academic Adair Turner the path to a zero carbon economy.

Chart of the day

European banks have served up another reminder of why some investors exercise enduring caution towards the sector. The implosion of Asian stock markets and fears of US recession knocked sector sentiment yesterday. With the Stoxx banks index down more than a tenth in the past week, the soft landing narrative is in its terminal stages. 

Take a break from the news

Located just south of Italy’s Lake Garda, Villa Sigurtà has hosted royals and aristocrats. The Palladian house is now available to rent and it won’t break the bank for a big group holiday, provided you can fill it.

Additional contributions from Benjamin Wilhelm and Harvey Nriapia