Japanese Market Sharply Higher

The Japanese stock market is sharply higher on Wednesday, extending the gains in the previous three sessions, with the Nikkei 225 moving above the 26,800 level, following the broadly positive cues overnight from Wall Street, as traders digested the hawkish comments made by US Fed Chair Jerome Powell on the outlook for interest rates and the economy.

Persistent inflation and aggressive rate hikes had stoked concerns about a potential recession. Powell said he is confident that the central bank can raise rates and deal with inflation without sending the economy into recession.

The benchmark Nikkei 225 Index is up 155.37 points or 0.58 percent at 26,815.12, after touching a high of 27,053.18 earlier. Japanese stocks closed modestly higher on Tuesday.

Market heavyweight SoftBank Group is gaining almost 2 percent, while Uniqlo operator Fast Retailing is edging down 0.4 percent. Among automakers, Honda is adding almost 2 percent and Toyota is edging up 0.5 percent.

In the tech space, Screen Holdings is edging up 0.3 percent, Advantest is gaining 1.5 percent and Tokyo Electron is adding more than 2 percent.

In the banking sector, Mizuho Financial is gaining more than 2 percent, Sumitomo Mitsui Financial is adding almost 2 percent and Mitsubishi UFJ Financial is up almost 1 percent.

Among the major exporters, Sony is gaining almost 2 percent, Canon is adding almost 1 percent and Mitsubishi Electric is edging up 0.4 percent, while Panasonic is losing almost 1 percent.

Among the other major gainers, M3, Fujitsu, IHI and Japan Steel Works are advancing more than 4 percent, while Nissan Motor is adding almost 4 percent. Kawasaki Heavy Industries, NTT Data, Hino Motors, Nintendo, Asahi Group and Isuzu Motors are gaining more than 3 percent each.

Conversely, CyberAgent and Kikkoman are losing almost 3 percent each.

In economic news, Japan’s gross domestic product contracted an annualized 1.0 percent in the first quarter of 2022, the Cabinet Office said in Wednesday’s preliminary reading. That exceeded expectations for a decline of 1.8 percent following the downwardly revised 3.8 percent increase in the previous three months (originally 5.4 percent). On a seasonally adjusted quarterly basis, GDP slipped 0.2 percent – but that also beat forecasts for a fall of 0.4 percent following the downwardly revised 0.9 percent gain in the three months prior.

In the currency market, the U.S. dollar is trading in the lower 129 yen-range on Wednesday.

On Wall Street, stocks stayed firm right through the day’s session after opening on a positive note Tuesday morning, and closed with strong gains thanks to sustained buying at several counters. Strong retail sales and industrial production data, some upbeat earnings updates and Fed Chair Jerome Powell’s positive comments about the strength of the economy helped lift sentiment.

The major averages all ended with impressive gains. The Dow ended with a gain of 431.17 points or 1.34 percent at 32,654.59. The S&P 500 settled higher by 80.84 points or 2.02 percent at 4,088.85, while the Nasdaq climbed 321.73 points or 2.76 percent to settle at 11,984.52, just a few points off the day’s high.

The major European markets also moved back to the upside following some encouraging economic data from the region. The U.K.’s FTSE 100 gained 0.72 percent, Germany’s DAX surged up 1.59 percent and France’s CAC 40 advanced 1.3 percent.

Crude oil prices pared early gains and settled lower Tuesday, reacting to reports that the Biden administration is set to ease some of the sanctions imposed on Venezuela. West Texas Intermediate Crude oil futures for June ended lower by $1.80 or 1.6 percent at $112.40 a barrel.

Market Analysis