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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Japanese stocks surged in early trade on Tuesday, rebounding from the previous day’s historic 12 per cent collapse.

Amid warnings from traders to expect extreme volatility over the coming hours, the broad Topix index rose 8.3 per cent in the first half-hour of trading as investors began cautious bargain-hunting and the yen stabilised at about ¥145.70 after two weeks on the rise.

Global markets have in recent days fallen amid fears the Federal Reserve has been too slow to respond to signs the US economy was weakening, and might be forced to play catch-up with a series of rapid interest rate cuts.

The global sell-off has been exacerbated by the unwinding of the so-called yen carry trade, in which traders had taken advantage of Japan’s low interest rates to borrow in yen and buy risky assets.

The rise in the Topix on Tuesday, along with an 8.2 per cent resurgence in the narrower, tech-heavy Nikkei 225 Average, came despite heavy overnight falls in US markets including a 3 per cent drop in the S&P 500.

The rally was echoed across other Asian markets, with the South Korean Kospi rising 4.5 per cent in early morning trading. The Taiwanese stock index, which had its worst selloff in history on Monday, recovered 4 per cent.

Atul Goyal, a Japan equities analyst at Jefferies, said that while fear was gripping markets, the fall in certain Japanese stocks on Monday had been “far too extreme”.

On Tuesday, a broad range of stocks in Tokyo soared, led by soy-sauce maker Kikkoman, whose stock was up more than 17 per cent. Carmaker Honda rose over 15 per cent and semiconductor equipment maker Tokyo Electron gained 15 per cent.

Financials, telecoms, industrials and parts of the tech sector were the main focus of buying in Japan on Tuesday after what Nomura strategist Tomochika Kitaoka described as “something akin to a taper tantrum”. 

A surprise Bank of Japan interest rate increase last week propelled the yen higher and triggered a three day equities sell-off, culminating in Monday’s dramatic fall. By Monday’s close, the Topix had lost all its gains for the year after hitting an all-time high on July 11.

After Monday’s close in Japan, traders and analysts struggled to explain the extremity of the sell-off, questioning why a hardening debate over the possibility of a US recession and a return of the dollar-yen rate to levels last seen in January had produced one of the country’s worst market collapses.

“There must be some forced or technical selling as the fundamentals did not change by 11-12 per cent in one weekend,” said Kiran Ganesh, multi-asset strategist at UBS. He added that a sharp sell-off presented a buying opportunity, but that the market would have to wait and see where the yen settles.

Others, including CLSA Japan strategist Nicholas Smith, pointed to the exaggerated impact of algorithmic trading programs, which may have specifically responded to the recent sharp upward move in the yen. 

“It does look like they are correlated with the yen,” Smith said. “After all the excitement about the prospects of AI, it now looks like AI may have got us into this mess.”

A onetime attorney for former President Donald Trump has agreed to a cooperation agreement with the Arizona attorney general in the state’s “fake electors” case.

Jenna Ellis, an attorney for Trump’s 2020 campaign, is one of 18 individuals charged in April for allegedly scheming to undermine President Biden’s victory in Arizona in 2020 and deliver the state’s 11 electoral votes to Trump.

Arizona Attorney General Kris Mayes announced Monday that Ellis agreed to cooperate with prosecutors and is willing to testify in court. In exchange, the state will drop the nine felonies — including fraud and conspiracy charges — filed against her.

“This agreement represents a significant step forward in our case,” Mayes said in a statement. “I am grateful to Ms. Ellis for her cooperation with our investigation and prosecution. Her insights are invaluable and will greatly aid the State in proving its case in court.”

In a statement, lawyers representing Ellis continued to claim she was not involved in the fake elector scheme.

“We are grateful the Arizona Attorney General’s Office completely dismissed the indictment against Jenna Ellis as she was not involved in the so-called ‘fake elector’ scheme,” attorneys Matt Brown and Matt Melito said in a statement. “Jenna was originally told she was not a target and her cooperation is her continued willingness to tell the truth.”

According to indictment, 11 of the individuals charged in the case — including former Arizona Republican Party Chair Kelli Ward and state Sens. Jake Hoffman and Anthony Kern — signed fraudulent documents claiming Trump won Arizona’s electoral votes. Other Trump allies, including Mark Meadows and Rudy Giuliani, also face charges in the case.

Ellis had pleaded guilty last year in Georgia in the Fulton County election subversion case.

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Rioters as young as 14 years old appeared in court in the UK on Monday, as the government promised that those involved in recent violent unrest will face “swift justice”.

Prime Minister Sir Keir Starmer called for perpetrators to be named and shamed as soon as possible, as he vowed to “ramp up criminal justice” and said a “standing army” of specialist police officers was being assembled to curb disorder.

The Cobra emergency response group of senior ministers and police and prison leaders met earlier in a bid to halt violence that has spread to more than a dozen towns and cities across England and Northern Ireland and led to hundreds of arrests.

Authorities were braced for more violence on Monday evening, while further protests are expected later in the week.

On Monday, Lord Alex Carlile, a former independent reviewer of the UK’s terrorism legislation, said prosecutors should consider charging riot ringleaders with terrorism offences.

“Fundamentally what they’re doing is being done for a political reason — trying to undermine the polity of the nation,” Carlile told the Financial Times, adding that any organisations involved in orchestrating violent demonstrations could also be proscribed by the state as terrorist groups.

The police have not requested that the army be called in, while Downing Street insisted the police have the powers and resources they need.

No 10 is also resisting demands from opposition MPs for parliament to be recalled over the crisis.

Several countries — including the UAE, Nigeria and Indonesia — have nonetheless issued alerts urging their citizens to avoid travel to the UK or attend gatherings while in the country due to the anti-immigration demonstrations and disorder.

Communities across northern England in particular started the week with efforts to clear up the aftermath of the weekend’s disorder, while the first people appeared in court charged in connection with it.

They included a 14-year-old accused of setting off fireworks in the direction of a police van in Liverpool, who pleaded guilty. The first sentencing hearings have been scheduled for later this month.

Suspects also appeared before magistrates in Sheffield, South Tyneside and Belfast. The ages of those appearing in court ranged from teenagers to pensioners, with a 69-year-old in the dock.

Since violence broke out in the wake of the Southport mass stabbing last week there have been 378 arrests, with the tally expected to rise.

Starmer drew attention to the suspected participants appearing in court on Monday, adding: “I have asked for early consideration of the earliest naming and identification of those involved in the process who will feel the full force of the law.”

Yvette Cooper, the home secretary, also told the BBC: “We do expect swift justice to take place. We do expect those cases to be reaching court this week.”

However, some suspects will not appear in front of a judge for weeks as the stretched legal system deals with a backlog. Avon and Somerset police said people accused of taking part in criminal unrest in Bristol are likely to attend court in September.

Meanwhile, Downing Street warned that foreign state actors could be involved in amplifying online misinformation fuelling disorder on UK streets.

In some parts of the country police stressed that people from a range of backgrounds had taken part in disorder.

Greater Manchester Police chief constable Stephen Watson said that “it was clear that across all events, there were people of all political and cultural backgrounds who attended with the intent of causing trouble and breaking the law”.

He added: “Justice will be forthwith.” The force tackled violent disorder in both Manchester city centre and Bolton last weekend and said it had made 23 arrests.

Following the Cobra meeting in London, Sir Mark Rowley, the most senior police officer in the country, appeared to grab a reporter’s microphone and cast it to the ground when he was asked about “two-tier policing” — the slogan accusing forces of dealing with some protests and activists more harshly than others.

The Met commissioner had been “in a hurry” when the incident occurred, the force said later.

Reform UK leader Nigel Farage claimed over the weekend that the “impression of two-tier policing” had “become widespread” in the UK.

The government also faced criticism from the left over its handling of the disorder.

Jeremy Corbyn, the former Labour leader, and four other independent MPs who campaigned heavily on a pro-Palestinian platform in the election, accused ministers of “pandering to those who have helped foment the ugly racism behind these protests”, as they hit out at “racist terror”.

In a joint letter to Cooper published on Monday — the latest sign of co-ordination between Corbyn, Ayoub Khan, Adnan Hussain, Iqbal Mohamed and Shockat Adam — the quintet welcomed the home secretary’s condemnation of “far-right thuggery”, but said she had not gone “nearly far enough” in identifying hatred against migrants and Muslims that was “driving this violence”.

“When people are under attack for the colour of their skin and their faith, government references to ‘understandable fears’ send mixed messages and only give succour to those seeking to sow hatred and division,” the five MPs said.