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Asia markets follow Wall Street higher

WT24 Desk

Asia stocks rebounded on Wednesday following gains on Wall Street as a sense of calm returned to global markets, BBC reports.

Japan’s Nikkei 225 index climbed 3.2% after falling nearly 7% in the previous session. The recovery follows choppy trading in the US which ended with the Dow Jones Industrial Average rising 2.3%.

Analysts said investors hunting for bargains in the wake of heavy sell-offs on world markets helped drive gains.

Elsewhere in Asia on Wednesday, Hong Kong’s Hang Seng climbed 2.8%, while Australia’s S&P/ASX 200 rose 1.3%, and South Korea Kospi index held steady.

What happened in the US?

The rebound in Asia tracked a strong lead from Wall Street. The Nasdaq closed up 2.1% and the S&P 500 rose 1.7%.

That brought relief to markets after a global sell-off began last week.

Investors dumped stocks after a solid US jobs report fuelled expectations that the economy’s strength would prompt the Federal Reserve to raise interest rates faster than expected.

The report came amid other shifts, including new tax cuts, trade tensions, and a sinking dollar, that analysts say could lead inflation to rise faster than expected.

On Monday, the Dow plunged by nearly 1,200 points or 4.6%, triggering follow-on losses in Asia and Europe.

The decline was the largest in percentage terms for the Dow since August 2011, when markets dropped in the aftermath of “Black Monday” – the day Standard & Poor’s downgraded its credit rating of the US.

What is the outlook for markets?

Stock markets in Asia and the US have been sitting at record levels and analysts have said for months a correction was due.

“Many view the [recent] downturn as a necessity to the runaway equity markets and see it as an opportunity for investors to reinvest at more manageable levels,” CMC Markets analyst Oriano Lizza said.

Analysts say that in the short term, investors should be prepared for choppier stock markets, but doubt whether there will be a prolonged period of selling.

“What we have to remember is stock markets have had a very smooth ride upwards and we’ve not had a fall of more than 3% for 15 months. There’s been a real lack of volatility, which is very unusual,” said Jane Sydenham, investment director at the stockbrokers Rathbones.

She added that bear markets – when shares go into a long period of decline – tend to happen ahead of a recession and at the moment growth forecasts were being upgraded.

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