Japanese Nikkei Follows Wall Street Higher After Broad Rally
On June 3, 2024, at 05:17 am
The Japanese Nikkei stock average rose on Monday, buoyed by a strong performance on Wall Street as investors held out hope for U.S. interest rate cuts this year. The Nikkei was up 0.9% at 38,849.65 by the midday break, approaching the psychologically important 39,000-point level. The broader Topix was up 0.83% at 2795.40.
Positive news on Wall Street helped shape sentiment during trading in Tokyo, following the Dow and S&P 500 ending higher on Friday night after month-end repositioning led to a late sharp rally. Meanwhile, the U.S. personal consumption expenditure (PCE) price index rose by 0.3% last month, in line with estimates, keeping expectations alive for the Federal Reserve to cut rates this year.
“There was a sense of relief in the market after the PCE inflation figures and a solid performance from U.S. stocks,” said Kenji Abe, a stock analyst at Daiwa Securities. The market also adjusted after Japanese government bond (JGB) yields hit their highest level in over a decade last week, sparking concerns about the negative impact on stock prices, he added.
“Investors were spooked, but now they see the levels of yields. … Real rates are still negative, so we have accommodative market conditions and we are likely to see earnings growth in the future.” The yield on the benchmark 10-year JGB last stood at 1.065%.
The financial sector, which tends to benefit in a higher rate environment, rose on Monday and helped lift Japanese indexes, with insurers and securities leading the 33 sector subindexes on the Tokyo Stock Exchange. However, gains extended well beyond the financial sector, with 187 of the 225 Nikkei stocks rising versus 37 decliners. One stock was not traded.
Among individual stocks, chip giant Tokyo Electron rose by 1.6%, while fellow heavyweight Fast Retailing gained 1.5%. Household electronics maker Sharp climbed 4.2% at the end of the morning session after announcing they will build an AI data center with KDDI powered by U.S. company Nvidia.
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