Following the dramatic drop on Monday, Tokyo stocks rebounded sharply on Tuesday, with the Nikkei Stock Average gaining over 10 percent during early trading, logging its largest-ever intraday gain.
Looking ahead, once the decline in global stock markets stabilizes and some panic subsides, the market is likely to quickly find its footing, and the probability of another “Black Monday” occurring in the short term is low.
From a medium to long-term perspective, once the Federal Reserve (Fed) starts cutting interest rates, central banks in many countries may also adopt more accommodative monetary policies, thereby increasing global capital liquidity. However, this does not guarantee that “Black Monday” will not reoccur.
The Fed ended its two-day policy meeting on July 31 and signaled a possible rate cut in September. As the negative effects of high interest rates on the U.S. economy continue to emerge, some economists worry that the Fed’s move to cut rates too slowly could pose risks for the U.S. economy.
“This is a market tantrum,” Priya Misra, a portfolio manager at JPMorgan, was quoted by the Financial Times as saying, referring to the global stock slide on Monday. “I think the market will continue to panic until the Fed shows signs of moving.”
In March 2022, the Fed implemented aggressive interest rate hikes to combat inflation, resulting in severe negative spillover effects on the global economy and causing multiple rounds of significant devaluation of various currencies around the world.
By continuously adjusting interest rates sharply, the United States has been reaping global wealth and shifting its own crisis onto others, leading to ongoing turbulence in international markets.
Against this backdrop, the severe declines in global stock markets on Monday mirror increasing concerns in the international market about the global economic outlook and escalating geopolitical conflicts, analysts have said.
