The Toronto Stock Exchange (TSX) started on a positive note on Aug. 7, making up for some of the day’s previous losses spurred by a global sell-off, but gains were short-lived.
The TSX was slightly in the red after midday, following U.S. markets closely.
Investors had to sit back and watch the meltdown in global markets on Aug. 5 with the TSX being closed for a civic holiday.
Playing catch-up, the index opened sharply lower on Aug. 6, but stocks rose mostly steadily throughout the day, following the global momentum.
The Canadian index had reach a record-high of over 23,000 points on July 31, but fell along with other markets last week following weak job data south of the border and fears of a recession.
The global sell-off amplified on Aug. 5 as the Japanese stock exchange Nikkei plunged 12 percent. This came after the Bank of Japan’s unexpected decision to raise interest rates to 0.25 percent, the highest since 2008.
The move led investors to exit currency carry trades, in which Japanese yen are borrowed at low rates to invest in higher-returning assets.
The Nikkei bounced back from its rut, and so have other indexes, after reassurances from the deputy governor of the Bank of Japan that a further hike at this time is unlikely.
“As we are seeing sharp volatility in domestic and overseas financial markets, it’s necessary to maintain current levels of monetary easing for the time being,” said Shinichi Uchida in a speech to business leaders in the Japanese city of Hakodate on Aug. 7.
Some economists have not been fazed by the recent flash crash, saying economic data is not all that gloomy.
Ian Lee, an associate professor at Carleton University’s Sprott School of Business, told The Epoch Times during the crash on Aug. 5 that global markets were likely “overreacting” to the U.S. jobs reports, given that the fundamentals of the U.S. economy are still strong.
Fears of a recession in the world’s largest economy remain, however, and and markets are awaiting signals from the U.S. Federal Reserve about an upcoming rate cut. Chairman Jerome Powell will be speaking at the Fed’s annual retreat in Jackson Hole, Wyoming, which takes place Aug. 22 to 24.
