Wall Street stages 'Turnaround Tuesday' after biggest sell-off in two years - but JPMorgan warns stock market rout is only 'half complete'

On Wall Street at 11.12am the Dow Jones Industrial Average rose 399 points, or 1.03 percent, to 39,102.29.

The S&P 500 gained 1.42 percent to 5,259.80.

The Nasdaq gained 1.41 percent to 16,428.15.

Europe's STOXX 600 index rose 0.46 percent in a volatile session with a dip of around 0.5 percent at its lowest point. The markets in Europe are now shut.

Fears of a US recession were blamed for Monday’s stock market rout.

But another factor also played a big role, according to JPMorgan - the unwinding of so-called ‘carry trades’.

A carry trade is when an investor borrows money in a currency with low interest rates. This has been happening with global investors borrowing in Japan, where interest rates were very low unlike most countries like the UK and the US.

But the Japanese yen has gone up in value by 11 per cent against the dollar in the past month after it became clear the Japanese central bank was set to raise interest rates.

That meant investors then had to unwind these carry trades.

'We are not done by any stretch,' Arindam Sandilya, co-head of global FX strategy at JPMorgan, said on Bloomberg TV.

'The carry trade unwind, at least within the speculative investing community, is somewhere between 50 to 60 percent complete.'

A financial author and stock market analyst now says the Federal Reserve will be forced to initiate an emergency rate cut ahead of its next meeting in September to tamp down on the widespread selloff of equities in the last several days.

Robert Prechter, the founder and president of Elliott Wave International, joined Neil Cavuto on Fox Business Monday evening and said the Fed missed a huge opportunity at its meeting last week to get ahead of the market calamity that continues to unfold.

'I think there's gonna be a surprise rate cut before the September meeting because I think rates have started falling faster,' he said.

The last time the Fed made emergency rate cuts came back during the early days of COVID, and many experts believe one won't happen again now because it would signal that the US economy is in terrible shape, possibly leading to even more market scares.

Back in January, Prechter warned that having too much optimism in the market was dangerous. He said Monday that this optimism is now 'entrenched' and that the world is seeing 'the most overgrown market ever.'

The S&P 500 rose 1.1 percent in the first hour of trading on Tuesday.

The tech-heavy Nasdaq also began to bounce back, up 0.7 percent by 10:30am.

Both indices were dragged 3 percent lower on Monday during a global stock selloff.

Bitcoin was up 0.6 percent at $54,734, rebounding from a near six-month low of $49,445 touched on Monday.

Apple is having another rough start to the day, with shares down more than 3 percent in the first half hour of trading.

The tech giant's shares sank more than 6 percent on Monday after Warren Buffet’s Berkshire Hathaway halved its stake in the company followed by news that it had lost a federal antitrust lawsuit.

US stocks nudged tentatively higher on Tuesday morning after Monday’s selloff.

The S&P 500 rose 0.5 percent in the first fifteen minutes of trading, but began to dip again.

The tech-heavy Nasdaq rose 0.7 percent.

Both indices were dragged 3 percent lower on Monday in a day of pain for investors.

The S&P 500 rose slightly as markets opened in New York at 9.30am.

Global stocks rose in jittery trading on Tuesday, as the uncertainty generated by the previous day's aggressive selloff weighed on investor sentiment, even though central bank officials said all the right things to soothe nerves.

The Nikkei's 10 percent rebound in Tokyo overnight delivered an initial sense of relief after the index's 12.4 percent drop on Monday - its biggest daily sell-off since the 1987 Black Monday crash.

European markets see-sawed, with the pan-regional STOXX 600 bouncing between a daily loss of 0.4 percent and a gain of 1 percent, while U.S. stock futures remained volatile.

S&P 500 futures rose 1 percent, having veered towards the 0-level earlier, while Nasdaq futures were up 1.2 percent.

The S&P 500 lost 3 percent on Monday, while the Nasdaq slumped 3.43 percent, extending a recent sell-off as fears of a possible U.S. recession spooked global markets.

European stock markets steadied Tuesday after Asian indices enjoyed some rebounds from a global rout fuelled by US recession fears.

Tokyo, which suffered a record loss Monday, led the gains to close up more than 10 percent as traders bought beaten-down stocks caught up in a catastrophic start to the week for markets.

But analysts warned there would likely be more volatility to come even as Europe's main stock markets -- which had fallen far less sharply Monday than their Asian peers -- steadied Tuesday.

Monday's sell-off followed data Friday showing fewer US jobs than expected were created last month, while another report pointed to continuing weakness in the manufacturing sector.

That led to warnings the US Federal Reserve had kept rates at more than two-decade highs for too long and risked causing a recession.

It meanwhile triggered market speculation that the US central bank could carry out an emergency cut to interest rates ahead of an expected reduction next month.