Japan’s Nikkei Rides Tech Rally to One-Month Closing High (UPDATE 1)

Reuters

12:06 JST, May 16, 2024 (updated at 16:00JST)

TOKYO (Reuters) – Japan’s Nikkei share average finished at its highest in a month on Thursday, as technology shares tracked their overseas peers higher after cooling U.S. inflation boosted market expectations for the Federal Reserve to cut rates in September.

The closely watched U.S. CPI report on Wednesday showed prices increased less than expected in April, suggesting that inflation resumed its downward trend.

That gave the green light to investors to keep buying, with Wall Street’s three major indexes notching record closes overnight.

Positive sentiment continued in Asian hours, with the Nikkei finishing up 1.39% at 38,920.26, its highest closing level since April 15.It briefly touched a one-month intraday peak of 38,949.38.

“The mood is one of relief,” said Kyle Rodda, senior financial market analyst at Capital.com.

“If nothing else, (Wednesday’s CPI) says a serious discussion about the need for further hikes has been taken off the table.”

Tech shares pulled the bulk of the weight on Thursday, riding after the S&P 500’s rate-sensitive tech stocks led sector gains.

Chip-related shares Tokyo Electron, up 4.5%, and Advantest, rising 3%, added a combined 197.5 points to the Nikkei’s near 535-point jump.

However, 126 of the Nikkei’s 225 constituents declined, as Japan’s earnings season wound up and investors searched for the next market driver.

The yen’s appreciation following U.S. CPI also weighed on shares of export-related firms, including index heavyweight Toyota Motor, down 1.6%.

The broader Topix closed up only 0.24% at 2,737.54.

Among other individual stocks, Uniqlo parent firm Fast Retailing gained 1.6%.

Recruit Holdings was up 9.1% on the staffing agency and publisher’s upbeat revenue release.

Mitsubishi UFJ Financial Group fell 4.3% after the firm forecasted only a slight profit growth in the current financial year.