Japan’s Nikkei Stock Snaps Three-Day Decline; Tech Earnings, Fed in Focus (UPDATE 2)

Reuters

11:56 JST, January 29, 2025 (updated at 17:00 JST)

TOKYO (Reuters) – Japan’s Nikkei snapped a three-day losing run on Wednesday, tracking Wall Street’s recovery from a sell-off triggered by Chinese startup DeepSeek’s AI model launch, with the focus now on major U.S. earnings and the Federal Reserve’s rate decision.

The Nikkei closed 1% higher at 39,414.78. The broader Topix gained 0.7% to finish at 2,775.59.

U.S. stocks ended higher on Tuesday, with Nvidia and other AI-linked tech shares bouncing back from sharp losses the previous day.

Japan’s tech shares seesawed on the day as investors remained on edge but ended on a strong note. Chip-testing equipment maker Advantest, which counts Nvidia among its customers, rallied 4.4%, giving the Nikkei the largest lift.

The focus now turns to the earnings reports of big U.S. tech companies, with more than half of the Magnificent 7 reporting this week.

U.S. tech firms’ capital investment strategies will likely be under scrutiny after DeepSeek said it was able to develop its AI model for a fraction of the cost, said Hiroshi Namioka, chief strategist at T&D Asset Management.

“The Nasdaq rose (overnight), but it doesn’t feel like you can let your guard down just yet,” he said.

Markets also await the Fed’s monetary policy decision later on Wednesday. The Fed is widely expected to hold interest rates steady, but the focus will be on its commentary for clues on the timing of the next rate cut.

Tokyo Electron and AI-focused startup investor SoftBank Group both added a little over 2%. Chipmaker Renesas Electronics jumped 5.9%, the most on the Nikkei.

Uniqlo parent Fast Retailing climbed 1.3%, while entertainment conglomerate Sony Group rose 3.8%.

Shin-Etsu Chemical lost 4.3% after the silicon wafer maker kept its earnings forecast for the fiscal year ending March 2025 unchanged.