US equity markets staged a comeback yesterday after a sharp sell-off, with Asian and European shares following Wall Street higher in today's trading.
After suffering its worst daily points decline in its 122-year history on Monday, the Dow was down 2.1% to 23,824 points soon after US markets opened yesterday and briefly fell into correction territory.
However, during a volatile session which saw the Dow trade in a wide range of 1,167 points, stocks eventually rebounded and ended up back in positive territory for the year, the Financial Times reports.
The S&P 500 recorded its biggest one day gain since November 7, 2016 to finish at 2,695, with technology the top-performing sector, while the Dow closed up 2.3% at 24,912 and the Nasdaq rose 2.13%.
The Vix or 'Fear' index also saw rapid movement yesterday as it soared 115% to above 50 before the session started, its highest level since August 2015, before falling back to around 30. This is a huge jump from 14 on Friday.
Meanwhile, Asian stocks followed the US's lead after suffering losses of over 4% on Tuesday. In afternoon trading, the Topix was up 1.6% while the Nikkei 225 had risen 1%.
European shares also rose this morning, after the Continent's major markets fell over 2% yesterday. The FTSE 100 suffered its worst day since the Brexit vote, closing down 2.64% at a nine-month low of 7,141, while Germany's Dax fell 2.32% and the French Cac 40 was 2.4% lower.
In morning trading, the FTSE 100 is up 0.68% to 7,189, led by a rebound for the Scottish Mortgage trust, which reversed yesterday's losses and rallied over 6%. Germany's Dax is up 0.69% today while the French Cac 40 was 0.68% higher by mid-morning.
Reasons for the pullback
US equity markets had been in a euphoric state since President Donald Trump passed his historic Tax Cuts and Jobs Act reform, which saw corporation tax cut from 35% to 21%. This pushed the S&P 500 up 5.9%, marking its best start to the year since 1987, prior to the recent pullback.
However, concerns over central bank policy and higher-than-expected inflation caused global bond markets to sell off on 29 January with 10-year Treasury yields rising to 2.73%, their highest point since April 2014.
Fears of contagion risk subsequently spread to equity markets last week as higher-than-expected US wage growth figures added to concerns the Federal Reserve may have to raise rates further and more aggressively than forecast.
Analysts have said the unravelling of popular volatility-linked trading strategies also added fuel to the sell-off.
But fund managers welcomed this "healthy" pullback, claiming the increase in volatility does not herald the start of a bear market but is instead an opportunity for investors.
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Luxembourg to become head office for EU business
Net issuance reached $473bn in 2017
As a result of changing environment
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