Asian equities rallied on Tuesday after the previous day's global rout fuelled by US recession fears that have led to calls for the Federal Reserve to cut interest rates before its next meeting.
While Wall Street's three main indexes suffered another day of pain– with the Nasdaq down more than 3 per cent – a forecast-beating read on the key US services sector provided a little solace for investors. "This is a sweeping, across-the-board gain," said analysts at Nomura, adding that investors will also pay close attention to the forex market.
Friday's data has fanned calls for the Fed to cut rates now to support the economy, with Nobel prize-winning US economist Paul Krugman writing on social media:"I wasn't calling for an inter-meeting cut because that might signal panic. Pantheon Macroeconomics wrote in a note to clients that the Fed"probably will place little weight on the drop in stock prices, as the main indexes still are higher than at the start of the year".
On currency markets, the yen's rally ran out of puff and was sitting just below 145 per dollar, having hit a six-month high of around 142 on Monday.The Japanese unit has surged over the past month – having hit a nearly four-decade low at the start of July – after the Bank of Japan hiked interest rates on the same day Powell indicated the Fed was planning to loosen policy.