SYDNEY/LONDON - European and Asian share markets rose on Wednesday, led by another bounce in the Nikkei, as the Bank of Japan unexpectedly turned cautious on rate hikes amidst market volatility, inducing a sharp fall in the yen.
Europe's broad Stoxx 600 index rose 0.8 percent in early trading, and Nasdaq futures were up 0.9 percent, having edged lower earlier in the day on a 12 percent dive in AI darling Super Micro Computer after it missed earnings estimates.
The Nikkei's 1.2 percent rise followed Tuesday's 10 percent rally, suggesting investors were finding their footing after the recent market rout. The index slumped 13 percent on Monday.
Sentiment had looked a little shaky early in Asia, but Bank of Japan (BOJ) Deputy Governor Shinichi Uchida said in a speech to business leaders the central bank will not raise interest rates when financial markets are unstable, boosting risk assets.
The dollar jumped 1.8 percent to 146.84 yen and away from the 141.675 trough hit on Monday, though it remains far below its July peak of 161.96.
The Japanese currency is very closely watched at present because its rapid appreciation has been blamed, in part, for the turbulence across global markets, as its rally forced investors to unwind carry trades in which they had borrowed cheaply in yen to invest in higher performing assets elsewhere.
And the sense is building across investors and analysts that the swings in markets, which reached their peak on Monday when global share benchmarks plunged, do not prefigure more sustained moves.
"I think you need to look at what didn't happen on Monday to get a sense of where this fits relative to other big periods of volatility, ... in other crises, you'd see the market for interbank funding get a lot tighter, and that didn't happen, gold didn't perform, and commodities didn't collapse," said Tim Graf, head of macro strategy for Europe at State Street Global Markets.
"For me this was a very extreme position washout taking place against the backdrop of lightly staffed trading desks and low liquidity, but it was nothing worse than that."
"From here I think we start to reverse some of those moves though not in full, I don't think you're going to see dollar/yen back at the highs at which it was."
In Europe, banking stocks, which have taken a bruising in recent days, were among the top gainers, up 1.6 percent and Novo Nordisk, Europe's largest company by market cap, caught the eye falling 3.3 percent after reporting weaker-than-expected second quarter profits.
Earlier in the day, MSCI's broadest index of Asia-Pacific shares outside Japan jumped 1.8 percent.
With safe-haven in less demand, government bond yields rose. US 10-year yields rose 5 basis points to 3.935 percent, and well off Monday's low of 3.667 percent, and the yield on the German 10-year Bund rose 9 bps to 2.275 percent, now nearly 20 bps of Friday's low.
Two-year Treasury yields climbed back to 4.028 percent, from a deep trough of 3.654 percent, as markets scaled back wagers on an intra-meeting emergency rate cut from the Federal Reserve.
Futures now imply 105 basis points of easing this year, compared with 125 basis points at one stage during Monday's turmoil, while a 50-basis-point cut in September was seen as a 73 percent chance.
Fears of an imminent US recession had also faded a little as the run of economic data still pointed to solid economic growth in the current quarter.
The Atlanta Fed's much-watched GDPNow estimate is that gross domestic product is running at an annual pace of 2.9 percent.
In commodity markets, gold prices also turned higher, up 0.1 percent at $2,391.00 an ounce and short of last week's $2,477 top.
Oil prices remained volatile as concerns about waning global demand warred with the risk of supply disruptions in the Middle East.
Brent rose 0.4 percent to $76.83 per barrel, while US crude was also up 0.5 percent to $73.58 a barrel.
