TOKYO: Japan’s Nikkei share average touched a 34-year peak on Wednesday, as a weaker yen buoyed the outlook for corporate profits, overshadowing the impact from overnight Wall Street declines and overall disappointing Chinese economic data.
The Nikkei rose as much as 1.83% to its highest level since February 1990 of 36,239.22 earlier in the session, before entering the midday break with a 0.54% gain to 35,810.35.
The broader Topix rose 0.59%. Overnight, the yen slumped against a resurgent dollar and all three main Wall Street indexes declined after Federal Reserve Governor Christopher Waller suggested market expectations for US interest rate cuts were overdone.
“There’s a warm wind blowing from a weaker yen,” said Nomura Securities strategist Kazuo Kamitani. At the same time, “there is still a sense of overheating” in the market, and the Nikkei may pause somewhere around 36,000 until the 25-day moving average, currently around 34,269, has a chance to catch up, Kamitani said.
The Nikkei has surged as much as 8.31% since the turn of the year, vastly outperforming other major markets.
Technical indicators, however, suggest the rally is overbought despite a pullback on Tuesday that snapped a six-day winning run.
Tokyo stocks snap winning streak to end lower
On Wednesday, after hitting the session’s high, the Nikkei rapidly pulled back. That was about half an hour before China released economic growth figures that narrowly missed analysts’ estimates.
There was little discernable reaction in Japanese stocks immediately following the data. One of the attractions of Japanese stocks for the foreign investors who are mainly driving the rally is the relatively better state of the local economy, said Stefan Hofer, chief investment strategist, LGT Bank Asia.
“In Japan, now we are moving to inflation, and the Japanese are really spending. That is driving earnings growth this will (likely) continue in 2024 and probably 2025.”
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