Japan’s Nikkei Rises on Weaker Yen, Wall Street Rally (Update 1)

Reuters

13:16 JST, February 5, 2024 (updated at 16:20 JST)

TOKYO (Reuters) – Japan’s Nikkei share average rose on Monday, buoyed by a weaker yen and gains on Wall Street at the end of last week.

The Nikkei added 0.54% to finish the day at 36,354.16, with 167 of its 225 components rising, while 56 declined and two were flat.

The broader Topix gained 0.67%.

Automakers were among the main beneficiaries of the yen’s slide against the dollar since Friday, when an unexpectedly strong jobs report knocked back expectations for an early Federal Reserve interest rate cut. A weaker currency boosts the value of overseas revenue and makes products more competitive.

Toyota Motor rose 1.37%, Nissangained 3.31% and Hondaadvanced 2.97%. Mazda Motor, which is particularly reliant on U.S. sales, jumped 4.13%.

The dollar surged as high as 148.82 yen JPY=EBS on Monday for the first time since late November, pulled by a jump in U.S. long-term Treasury yields US10YT=RR to the cusp of 4.1% by Monday’s Asian trading.

Despite the jump in yields, all three of Wall Street’s main indexes rose to fresh closing highs on Friday.

“The rally on Wall Street despite long-term U.S. yields rising above 4% has given Japanese stock investors a sense of confidence,” said Maki Sawada, an equity strategist at Nomura Securities, who predicts the Nikkei will trade between 36,000 and 36,500 this week.

“Hopes for Japanese stocks, from earnings to corporate governance reforms to the end of deflation, means investors are very conscious of a firm floor for the market,” she added.

The earnings season moved into high gear at the end of last week and will peak in mid-February.

Financial results produced some outsized winners and losers on Monday, with Sumitomo Chemical slumping more than 7% to be the Nikkei’s biggest percentage decliner after it cut its earnings forecast.

At the other end, Panasonic Holdings jumped 4.6% after posting a rise in profit.

Mitsui Fudosan climbed 6.57% after the Financial Times reported that U.S. activist fund Elliott Management has called on Japan’s biggest property group to launch a 1 trillion yen ($6.74 billion) buyback.

$1 = 148.3200 yen