SYDNEY: Japanese shares hit highs not seen since 1990 on Monday as strong earnings and offshore demand fuelled a three-week winning streak.
Japan’s Nikkei ran into profit-taking at the peak but was still up 8.2% for the month so far with the Topix not far behind. Financial shares led the gains on Monday as investors prepare for an eventual end to negative rates, while auto makers have been benefiting from a weak yen and high exports.
MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.8%, having climbed 2.8% last week to a two-month high. The Black Friday sales will test the pulse of the consumer-driven US economy this week, while the Thanksgiving holiday will make for thin markets.
There were media reports Israel, the United States and Hamas had reached a tentative agreement to free dozens of hostages in Gaza in exchange for a five-day pause in fighting, but no confirmation as yet.
Chinese blue chips dipped 0.2% as the country’s central bank held rates steady as widely expected, but set a firm fix for the yuan that saw the dollar slip under 7.2000 to a three-month low.
EUROSTOXX 50 futures held steady, while FTSE futures were a fraction firmer. S&P 500 futures eased 0.15% and Nasdaq futures lost 0.35%. The S&P is now up nearly 18% for the year and less than 2% away from its July peak. Yet analysts at Goldman Sachs note the “Magnificent 7” mega cap stocks have returned 73% for the year so far, compared with just 6% for the remaining 493 firms.
“We expect the mega-cap tech stocks will continue to outperform given their superior expected sales growth, margins, re-investment ratios, and balance sheet strength,” they wrote in a note. “But the risk/reward profile is not especially compelling given elevated expectations.”
Tech major Nvidia reports quarterly results on Tuesday, and all eyes will be on the state of demand for its AI related products. The flow of US economic data turns to a trickle this week, but minutes of the Federal Reserve’s last meeting will offer some colour on policy makers’ thinking as they held rates steady for a second time.