Japan’s Nikkei Surrenders Most Early Gains as BOJ Data Lifts Rate-Hike Bets (UPDATE 1)

Reuters

12:55 JST, July 1, 2024 (updated at 16:30 JST)

TOKYO (Reuters) – Japan’s Nikkei share average gave up most of its early gains to end little changed on Monday, as the central bank’s Tankan survey drove expectations for interest rate hike bets.

The Nikkei inched up 0.12% to close at 39,631.06, after rising as much as 0.9% earlier, tracking its futures higher in the previous session.

The Nikkei average futures on the Chicago Mercantile Exchange ended 1% higher on Friday.

“The outcome of the BOJ’s tankan suggested that Japanese companies will keep raising prices and inflation will continue,” said Shuutarou Yasuda, a market analyst at Tokai Tokyo Intelligence Laboratory.

“That lifted expectations that the BOJ will raise rates again soon, and promoted inventors to sell stocks to lock in profits.”

The BOJ’s closely watched “tankan” survey showed the headline sentiment index for big manufacturers hit +13 in June, up from +11 in March and slightly exceeding a median market forecast for a reading of +12.

The reading, the highest since March 2022, reflected a rebound in automobile sector output and success by manufacturers to pass on rising raw material costs through price hikes.

The broader Topix closed up 0.52% at 2,824.28, after hitting 2,838.67, its highest since January 1990.

“Investors sold stocks as they thought the Nikkei’s level earlier in the session was not justified,” said Jun Morita, general manager of the research department at Chibagin Asset Management.

“But the positive news today was that the Topix hit a new high, which means the market bought value stocks in a broad rally.”

The Topix’s index for value stocks jumped 0.96%, while the index for growth shares inched up 0.05%.

Shares of department store operators rose, with J.Front Retailing surging 14.72% to become the top percentage gainer on the Nikkei and Takashimaya jumping 11.09%, after they raised their annual profit forecast.