Tokyo surges to 30-year high as shares start week with rally

Asian shares have started the week off with a rally, as Japan’s Nikkei 225 index closed above 30,000 for the first time since 1990

The recovery should put the economy on track to recover to pre-pandemic levels by next year, helped by a recovery in demand for exports in the U.S. and other major trading partners, Marcel Thieliant of Capital Economies said in a report.

Japan recently re-imposed a state of emergency in Tokyo and several other prefectures to battle a resurgence of outbreaks. But sustained corporate investment and government spending are expected to help offset the impact on travel, restaurants and other sectors most affected.

“And while most economists expect a renewed contraction this quarter due to the second state of emergency, we think that output will be broadly flat in Q1 and rise more strongly this year than almost anyone anticipates,” Thieliant said.

The Nikkei 225 closed up 1.9% at 30,084.15. It was its highest level since August 1990, just as Japan’s bubble economy was beginning to implode after peaking at nearly 40,000 in 1989.

Thailand’s SET benchmark index gained 1.3% after the government forecast the economy will expand by 2.5%-3.5% this year after contracting 6.1% in 2020 as the government restricted international travel and imposed other limits on activities to combat the pandemic.

On Friday, technology companies led a late-afternoon rally on Wall Street that capped a week of wobbly trading. with the major stock indexes hitting all-time highs.

The S&P 500 rose 0.5% to 3,934.83, a record high for the second day in a row. It was its second straight weekly gain.

The tech-heavy Nasdaq composite picked up 0.5%, to 14,095.47, also a record. The Dow Jones Industrial Average likewise set a new high, edging 0.1% higher to 31,458.40.

Traders also bid up shares in smaller companies. The Russell 2000 index rose 0.2%, to 2,289.36.

Optimism that Washington will come through on trillions of dollars of more aid for the economy and encouraging company earnings reports have helped stocks grind higher this month, along with hopes that the coronavirus vaccine rollout will set the stage for stronger economic growth in the second half of this year.

Democrats have decided to use a legislative process that does not require Republican support to pass the $1.9 trillion package proposed by President Joe Biden.

“Markets remain target fixated on the Biden stimulus and vaccine rollouts as the magic panacea for the world’s pandemic ills,” Jeffrey Halley of Oanda said in a commentary. That has translated into higher stock prices, with the world awash with stimulus funds seeking returns in a world where interest rates are around zero percent, he said.

A majority of companies have now reported their latest round of earnings and the results have been surprisingly good. Roughly 75% of companies in the S&P 500 have released results, showing overall growth of 2.8%, according to FactSet. That’s a sharp reversal from the 13% contraction analysts had forecast in late September.

In other trading:

The yield on the 10-year Treasury rose to 1.21% from 1.20% late Friday.

U.S. benchmark crude oil picked up $1.17 to $60.64 per barrel in electronic trading on the New York Mercantile Exchange. It advanced $1.23 to $59.47 per barrel on Friday. Brent crude, the international standard, gained 91 cents to $63.34 per barrel.

The U.S. dollar rose to 105.11 Japanese yen from 104.99 yen late Friday. The euro strengthened to $1.2138 from $1.2123.

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