Global stocks jumped after the Bank of Japan (BoJ) moved to reassure markets following historic volatility that was partly triggered by last week's unexpected interest rate hike.
Futures on the S&P 500 and Nasdaq 100 rose after the main index rose more than 1% on Tuesday amid buying as prices fell. The Stoxx Europe 600 index rose more than 1%, with mixed earnings reports from some of the region's biggest companies doing little to dampen the risk-on mood. Japanese stocks led broad gains in Asia.
Bank of Japan Deputy Governor Shinichi Uchida sent a strong dovish signal by pledging to refrain from raising interest rates when markets are volatile. The yen weakened as much as 2% against the US dollar after his remarks, which were the first public comments by BoJ board members since the bank raised rates on July 31.
The rate hike led to a three-day slide in Japanese stocks, a surge in the yen and a rapid easing of carry trades that lowered risk assets around the world. Concerns about a U.S. economic slowdown and skyrocketing valuations for tech stocks helped fuel a dramatic sell-off on Monday, capping a three-week wipeout of $6.5 trillion in stocks.
Volatility eased as the S&P 500 recovered from its worst one-day drop since September 2022. The CBOE Volatility Index fell another 16% on Wednesday following its biggest drop since 2010.
Still, the recent turmoil is "a stark reminder of how quickly things can change," said Chief Investment Officer at St James Place, Justin Onuekwusi. "While the overall corporate balance sheet is healthy and recession risk is low, we are starting to see earnings decline slightly and the company's guidance predicts a more uncertain future."
Treasury yields rose slightly and the US dollar index strengthened for a second day. Meanwhile, a weaker yen strengthens higher-yielding currencies. The Mexican peso, a carry trade target that fell after the BoJ rate hike, rose 1.5% against the US dollar on Wednesday.
