Japanese Stocks Surge as Nikkei Hits 34-Year High
Japan’s Nikkei share average reached a remarkable 34-year high on Tuesday, as trading resumed after a long holiday weekend. The benchmark stock index was bolstered by strong corporate earnings and a surge in tech-related shares. The Nikkei soared 2.89% to 37,963.97, its highest level since January 1990, briefly surpassing the 38,000-point mark. The broader Topix also experienced gains, rising 2.12%.
Leading the charge was chip-sector giant Tokyo Electron Ltd, which saw an impressive 13.33% gain, making it the top performer of the day. SoftBank Group Corp also experienced significant growth, rising 6.27%. This was largely due to the rally in semiconductor developer ARM Holdings shares, in which SoftBank holds a 90% stake. Tokio Marine Holdings Inc and MS&AD Insurance Group Holdings Inc were among the other notable gainers, with increases of 11% and 10.82% respectively.
The impressive performance of Japanese equities was further boosted by a strong showing on Wall Street and a weakened yen, which enhanced the value of overseas revenue for exporters. Throughout the session, the yen traded around 149.47 per dollar. “We have raised our outlook for Japanese equities in 2024, taking into account changes in macroeconomic conditions, including the yen weakening early in the year, and progress on structural reforms,” stated J.P. Morgan analysts.
Of the 225 constituents in the index, 196 experienced gains, while only 26 declined. However, as the Nikkei approaches its all-time high, attention will now turn to the U.S. Consumer Price Index (CPI) report. The interconnectedness of the yen and the Nikkei means that any strength in the yen resulting from the release of the CPI data, or hints of verbal intervention, could potentially disrupt the ongoing rally in the stock market, warned Charu Chanana, Head of Currency Strategy at Saxo Markets.
However, not all stocks benefited from the surge. Otsuka Holdings faced a decline of 5.05% after the company announced that its experimental drug had failed to meet a primary goal in a late-stage trial focused on treating agitation associated with dementia caused by Alzheimer’s disease.
Analyst comment
Positive news: Japanese Stocks Surge as Nikkei Hits 34-Year High
As an analyst, the market is expected to continue its upward trend due to strong corporate earnings, a surge in tech-related shares, a weakened yen, and a positive performance on Wall Street. However, the release of the U.S. Consumer Price Index (CPI) report and potential yen strength may pose risks to the ongoing rally. Certain stocks, such as Otsuka Holdings, suffered declines due to specific factors.
