An electric board displays the Nikkei stock average rate and Dow Jones Industrial Average in Chuo Ward in Tokyo on October 12, 2018. Photo: AFP/The Yomiuri Shimbun
An electric board displays the Nikkei stock average rate and Dow Jones Industrial Average in Chuo Ward in Tokyo on October 12, 2018. Photo: AFP/The Yomiuri Shimbun

Stock markets in Asia and Europe rallied on Friday after two days of selling and falls in United States markets over fears about interest rates, trade wars and President Donald Trump labeling his central bank “crazy.”

Equities across Asia closed in the green after another up-and-down day as some stocks initially suffered further heavy losses before bouncing back strongly.

European markets followed Asia’s lead, with Paris and Frankfurt enjoying a strong opening, with both up more than 1%. London also climbed at the open, but only by 0.4%.

The recovery followed two days of near panic in global equity markets, as investors took fright in the face of rising US interest rates and the intensifying trade war between Washington and Beijing.

The Dow Jones Industrial Average lost more than 5% since Tuesday, its biggest two-day loss in eight months.

The global sell-off was also due in part to Trump describing the policies of the Federal Reserve as “loco” and “crazy,” sparking concerns over the independence of the world’s top central bank.

However, there was no single headline that prompted the sell-off this week, though analysts have broadly attributed the declines to a rise in interest rates and ripple effects from trade tensions.

In Asia on Friday, Tokyo closed near half a percentage point higher after a see-sawing session that saw it open in the red, but quickly pare losses.

Elsewhere in Asia, China’s Shanghai Composite climbed 0.9% after suffering heavily on Thursday. Official data released early on Friday showed China’s trade surplus with the US hit a record in September – despite Washington’s tariffs – adding fuel to the trade war between the world’s top two economies. The Shenzhen composite advanced by 0.19%.

Seoul, Hong Kong, Sydney and Wellington also enjoyed strong gains on Friday.

Sanity returns

“There’s a semblance of sanity returning to the markets, but we are no nearer a significant recovery,” Stephen Innes, head of trading for Asia Pacific at OANDA, said in a commentary.

Markets are “exhausted after the most significant sell-off in global equities since February,” he added.

After a volatile session on Wall Street, the Dow Jones ended 2.1% down, taking its losses for the week to more than 5% and closing at the lowest levels in months.

Some experts warned that the correction, which came after many indices had hit multi-year highs, would be more than a flash in the pan.

“When we have a recalibration in values, it’s not surprising that it takes more than one day,” said Art Hogan, chief market strategist at B Riley FBR. “In these kinds of moves, it usually takes three days to wash out.”

Most market watchers saw last week’s surge in 10-year US Treasury bond yields as the catalyst for the two-day rout on Wall Street.

Yields spiked at an unexpectedly fast rate, prompting worries about a sudden acceleration of inflation and more aggressive Federal Reserve interest rate hikes.

Volatility also spread to commodities with big drops in the price of oil after the OPEC cartel cut its forecast for global oil demand.

With AFP and agencies.

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