Japan’s Nikkei Retakes 39,000 Level for First Time Since Mid-April (UPDATE 1)

Reuters

12:44 JST, May 20, 2024 (updated at 15:55 JST)

TOKYO (Reuters) – Japan’s Nikkei share average rose on Monday, hitting 39,000 points for the first time in a month, as higher expectations for U.S. interest rate cuts continue to keep market sentiment upbeat.

The Nikkei closed 0.73% higher at 39,069.68, jumping over 1% during trading before profit-taking set in. It was the first time the benchmark index reached the psychologically significant 39,000-point range since April 15.

The broader Topix was up 0.82% at 2768.04.

A milder inflation report last week has investors once again pricing in U.S. rate cuts as early as September, buoying global market sentiment and in turn boosting Japanese equities.

Wall Street, which Japan’s stock market tends to track, saw stock indexes lock in weekly gains despite ending mixed on Friday. The Dow Jones Industrial Average closed at a record high.

Futures of U.S. stock indexes were also up during Tokyo trading time, which may also have provided investors with a “sense of confidence,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management.

The Nikkei hit an all-time high of 41,087.75 earlier this year before falling nearly 5% last month in its largest monthly drop since December 2022. It is up about 16% this year.

On Monday, buying was widespread, with 183 of the index’s 225 constituents advancing. Gains narrowed, however, as investors sought to lock in profits.

Among individual shares, Fast Retailing was up 0.9%, and chip-making equipment giant Tokyo Electron gained 0.7%.

Shin-Etsu Chemical, which manufactures chip silicon products among other things, jumped 4.2%.

AI-focused startup investor SoftBank Group fell 2.8%.

Advantest, which counts U.S. artificial intelligence firm Nvidia among its customers, edged down 0.4% as investors awaited Nvidia’s revenue results due later this week.

“If the market perceives (Nvidia’s) outlook as better than expected, …it will react with a rally in chip-related shares, not just in the U.S. but also in Japan,” said Ichikawa.