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Japan’s Nikkei index surged nearly 3% on Friday, marking its strongest weekly performance since April 2020, as U.S. retail sales data alleviated concerns about a potential recession in the world’s largest economy.
The rally followed robust U.S. retail sales figures, which increased by 1% in July, reversing a revised 0.2% drop in June. The strong data soothed fears of an economic downturn in Japan’s biggest trading partner, sending markets higher globally.
Investor sentiment in Japan was broadly positive, with 219 of the 225 stocks in the Nikkei advancing. Among the top performers were Fast Retailing, which jumped 6.2%, and chipmaker Advantest, which surged 6.8%. Export-driven companies like Toyota Motor also benefited from the yen’s depreciation against the dollar, with shares rising by 2%.
This sharp recovery comes just days after the Nikkei suffered a major loss, triggered by recession concerns and a strengthening yen. However, the week ended on a high note, as investors regained confidence in the stability of the U.S. economy.
Market analysts believe that the latest surge reflects optimism that the U.S. will avoid a hard landing as inflation cools. The retail sales data bolstered expectations that the Federal Reserve will maintain a measured approach to interest rate hikes, easing fears of aggressive monetary tightening.
The rally in Japanese equities mirrored gains across global markets. The MSCI Asia Pacific Index rose by 2.3%, and European and U.S. markets also saw modest increases, buoyed by improving economic data and growing investor confidence in a more stable global economic outlook.
Japan’s export-reliant economy continues to benefit from a weaker yen and steady U.S. growth, market observers remain optimistic that the Nikkei’s positive momentum will carry into the coming weeks.