Nikkei Rebounds 1.7 Percent After a 4.9 Percent Plunge as Yields Ease

Updated 09:20 UTC

Asia has closed, and the rebound held to the close in Seoul and Tokyo while Jakarta stayed in free fall. South Korea's Kospi closed up 2.05 percent at 5,668.05, ending seven straight sessions of losses, on Korea Exchange figures reported by the Seoul Economic Daily. The Kosdaq closed up 4.46 percent at 794.78, and a buy side sidecar paused program buying for five minutes at about 12:55 p.m. after Kosdaq futures jumped. Samsung Electronics closed up 2.62 percent at 215,500 won and SK hynix closed up 0.79 percent at 1,272,000 won, after falls of 9.48 percent and 11.06 percent on Thursday.

Japan's Nikkei 225 closed up 1.39 percent at 65,324.29, snapping a six session losing streak. Tokyo Electron rose 2.56 percent, Kioxia gained 3.84 percent and SoftBank Group rose 1.9 percent. The broader Topix rose 1.67 percent. Comments from Nvidia chief Jensen Huang defending CoreWeave, and remarks from Federal Reserve Chair Kevin Warsh, helped calm the AI debt worry that set off the selloff, the Wall Street Journal and Korea JoongAng Daily reported.

The close still left a hard week behind it. The Kospi fell 14.46 percent for the week, its biggest weekly drop since October 2008, and the Nikkei fell 5.37 percent for the week. Indonesia was the exception in Asia. Jakarta fell about 11 percent on Friday, its steepest one day drop since January 1998, after MSCI proposed removing Indonesia from its emerging market indexes. That story is covered in full in our MSCI report.

Japan's Nikkei 225 rose 1.7 percent to 65,519.78 in morning trade on Friday, October 16, clawing back part of the 4.9 percent fall that left it at 64,425.95 at Thursday's close. The Wall Street Journal reported the index up 1.0 percent at 65,085.40 in early trade, tracking gains on Wall Street overnight, and the advance extended from there. TradingKey reported an opening rise of 0.78 percent to 64,925.29.

Why Tokyo bounced

US Treasury yields fell back on Thursday despite a hot US inflation report, and comments from Federal Reserve officials cooled bets on an October rate hike, the Journal reported. That eased one of the pressures behind the selloff in AI linked stocks. Reuters, in its Trading Day wrap, put the US 10 year yield down 10 basis points at 5.08 percent and the Dow up about 1 percent on the day.

On Wall Street on Thursday, the Dow Jones Industrial Average rose 1.08 percent to 52,177.69, the S and P 500 gained 0.33 percent to 7,744.06, and the Nasdaq Composite added 0.08 percent to 26,713.03, FNArena and TradingKey reported. Chip stocks stayed weak. The Philadelphia Semiconductor Index fell 0.88 percent, its seventh straight loss. In Tokyo, Nomura Research Institute rose 5.7 percent, Sanrio advanced 5.2 percent and Konami Group added 5.0 percent in early trade, the Journal reported. SoftBank Group rose 0.95 percent and Kioxia advanced 0.54 percent, TradingKey reported.

Mumbai and London closed higher on Thursday

India's Sensex closed up 2.11 percent at 74,315.61 on Thursday, and the Nifty 50 gained 1.66 percent to 22,997.35, The Hindu BusinessLine reported. Brent crude fell more than 2 percent to $103.55 a barrel, the rupee rose 12 paise to 95.05 against the dollar in its fifth straight gain, and technology, private bank and auto shares led the market.

In London, the FTSE 100 closed at 10,840.35, up 115.49 points or 1.08 percent, FNArena reported in its overnight tables. Reuters reported that banks led the market higher after Finance Minister John Healey backed fiscal discipline, and that UK GDP rose 0.1 percent in August against a forecast fall of 0.1 percent. The 10 year gilt yield fell to 5.34 percent, NatWest rose 2.3 percent and Standard Chartered gained more than 1 percent, while miners limited the advance and Antofagasta fell 5.8 percent in session trade.

What happens next

The rebound is a partial repair, not a full recovery. The Nikkei still sits below its level before Thursday's plunge, and chip stocks have now fallen for seven sessions in the US. Traders will watch the Tokyo close on Friday, the Friday sessions in Mumbai and London, and US import and export price data due at 8:30 a.m. ET on October 16. If yields keep falling, buyers may hold their nerve. If yields climb again, the AI selloff has shown how fast it can return.