Japan’s Nikkei Marks Record Closing High as Chip-Related Shares Rally (UPDATE 1)

Reuters

12:36 JST, July 9, 2024 (updated at 16:30 JST)

TOKYO (Reuters) – Japan’s Nikkei share average rose to a record close on Tuesday, with chip-related stocks following their U.S. peers higher as investors awaited testimony from Federal Reserve Chair Jerome Powell for clues on the path of interest rates.

The Nikkei closed 1.96% higher at 41,580.17, after rising as much as 2.4% to a record intraday high of 41,769.35.

“The market expects Powell’s comments will indicate policy easing, which lifted U.S. chip stocks overnight and the Japanese chip makers tracked the trend,” said Takehiko Masuzawa, trading head of Phillip Securities Japan.

The S&P 500 and Nasdaq notched record closing highs on Monday, with Nvidia rising 2% and Intel rallying more than 6%. The Philadelphia semiconductor index .SOX jumped 1.9%.

Powell will deliver two days of testimony before Congress, beginning later in the day with the Senate and followed by the House on Wednesday.

Traders now see a more than 75% chance of an interest rate cut of at least 25 basis points by September, up from last week’s 60%, according to CME’s FedWatch.

In Japan, chip-making equipment maker Tokyo Electron jumped 3.77% and chip-testing equipment maker Advantest climbed 4.14%.

Uniqlo-brand owner Fast Retailing rose 3.22%.

The Fed rate-cut expectations weighed on Japanese banks, sending the banking index 0.7% lower.

The index for value shares rose 0.52%, while the growth stock index jumped 1.46%.

The broader Topix ended 0.97% higher at 2,895.55, after hitting a record intraday peak of 2,907.21.

Investors were cautious about the possible impact of a sell-off in exchange-traded funds on Wednesday, a move to distribute payouts, which market players estimate to be worth about 750 billion yen ($4.66 billion), said Phillip Securities Japan’s Masuzawa.

The Nikkei is overshooting, rising to a level that is not justified by the domestic corporate outlook, said Jun Morita, general manager of the research department at Chibagin Asset Management.

$1 = 160.9800 yen