Unlock Premium Data: Up to 50% Off InvestingProCLAIM SALE

Japan's Nikkei scales 34-year peak on Wall Street record

Published 01/22/2024, 03:24 AM
Updated 01/22/2024, 03:25 AM
© Reuters. Visitors walk past Japan's Nikkei stock prices quotation board inside a conference hall in Tokyo, Japan September 14, 2022. REUTERS/Issei Kato
US500
-
JP225
-
NVDA
-
SMCI
-
6857
-
9984
-

By Kevin Buckland

TOKYO (Reuters) - Japan's Nikkei share average rallied to a fresh 34-year peak on Monday as the U.S. S&P 500's record-high close on Friday buoyed investor sentiment, despite continued signs of overheating in the Asian market.

After opening sharply higher, the Nikkei fell back a bit in the morning session before rising as much as 1.69% to 36,571.80, a level not seen since February 1990, in late trade. It closed the day 1.62% higher at 36,546.95.

The rally was extremely broad-based, with 207 of the index's 225 components advancing, versus 17 decliners and one that was flat. Also, every Nikkei sector gained with real estate and technology being the top performers.

On Friday, the S&P 500 posted its first record-high close in two years, as AI fever drove big gains for chip shares and other heavyweight tech stocks, with server maker Super Micro Computer (NASDAQ:SMCI) lifting its profit forecast.

In Japan, AI-focused startup investor SoftBank (TYO:9984) Group gained 2.41%, while chip-testing equipment maker Advantest, which counts Nvidia (NASDAQ:NVDA) among its customers, climbed 3.52%.

The Nikkei's 9.2% advance so far this year has put it head and shoulders above developed market rivals, many of which are in negative territory.

However, analysts have been warning of a potential pullback as technical indicators suggest the market has overheated. The relative strength index (RSI), for example, sits at 76.2, well above the 70 level that signals overbought conditions.

Japanese shares have had an additional tailwind this year from receding bets for an imminent end of Bank of Japan stimulus, particularly after the devastating New Year's Day quake on the country's west coast. The central bank announces policy on Tuesday.

The Nikkei generally rallies on a weaker yen, as it makes Japanese exports more competitive and boosts the value of overseas revenue. However, an ostensibly yen-boosting hawkish BOJ shift won't necessarily hurt the Nikkei rally, according to OANDA strategist Kelvin Wong.

"The Nikkei 225 is much more following the U.S. stock benchmarks now, rather than the dollar-yen rate," Wong said.

© Reuters. Visitors walk past Japan's Nikkei stock prices quotation board inside a conference hall in Tokyo, Japan September 14, 2022. REUTERS/Issei Kato

"Even if the BOJ signals it's starting to shift away from negative interest policy tomorrow, I think that could be a positive for the Nikkei, because it gives market participants confidence that Japan is not going to slip back into deflation."

Although the Nikkei looks due for a short-term pullback, the uptrend remains intact, and a test of 37,000 is likely in coming weeks, Wong said.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.