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Japan’s Nikkei share average made a significant recovery on Monday, rebounding from a three-month low reached in the previous session. The uptick followed a strong performance by Wall Street at the end of last week, which positively influenced investor sentiment across global markets.
The Nikkei 225 surged 2.13% to close at 38,468.63, marking its first gain in nine trading sessions. The broader Topix index also saw substantial growth, climbing 2.23% to finish at 2,759.67. This broad-based rally came in response to a rebound in U.S. technology stocks and improved market expectations regarding Federal Reserve monetary policy.
The Nikkei’s rally was prompted by Wall Street’s positive turnaround on Friday, which saw major indices climb as investors returned to technology giants that had previously experienced significant sell-offs. Additionally, favorable U.S. inflation data has heightened hopes that the Federal Reserve may soon start reducing interest rates, further boosting investor confidence.
Masahiro Ichikawa, Chief Market Strategist at Sumitomo Mitsui DS Asset Management, commented on the shift, noting, “The decline in U.S. technology shares has finally paused, which seems to be a positive factor for Japanese equities.”
In Monday’s trading, all but 11 of the Nikkei’s 225 components posted gains. Notably, technology and chip-related stocks contributed significantly to the index’s advance, with Tokyo Electron and Advantest rising 3.7% and 4.1%, respectively. SoftBank Group, a prominent investor in AI startups, increased by 2.3%. Furthermore, every sector on the Tokyo Stock Exchange experienced growth, reflecting broad-based optimism.
The rally comes ahead of key policy meetings by the Bank of Japan and the Federal Reserve scheduled for July 30-31. Ichikawa anticipates that the Nikkei may face limited volatility as the markets await the outcomes of these pivotal discussions.
Investor attention will also be focused on earnings reports from major U.S. technology firms, often referred to as the “Magnificent Seven,” which are expected to further influence market dynamics.
Among individual stocks, Shin-Etsu Chemical saw a notable rise of 8.6% after surpassing its operating profit forecast for the April-June quarter. Conversely, Eisai experienced a sharp decline of nearly 13% following the European Union regulator’s decision to reject its Leqembi treatment for early Alzheimer’s disease.
Overall, the Nikkei’s rebound reflects a broader positive sentiment driven by external market forces and sector-specific developments.