Japan's Nikkei 225 breaches 43,000 for first time ever
After hitting 42,999.71 intraday on Tuesday , the Nikkei 225 stock index breached the 43,000 level for the first time ever on Wednesday and continued higher from the open with some conviction. The benchmark ended the day up 1.30%, at 43,274.67.
"If the market continues in this fashion, it does appear that 45,000 is the next target that you're going to be facing,' said Takeo Kamai, head of execution services at CLSA Japan.
Shares in Toyota Motor, Japan's largest company by market capitalization, rose 0.7% on Wednesday and is up about 6.4% over the past week. Sony Group shares rose 3.46% while Recruit Holdings gained 5.10%.
Mitsubishi Heavy Industries shares were up 3.79% and are trading at all-time highs. Its share price has more than doubled over the past year and has risen 14-fold over the past five years.
The yen was steady on Wednesday, strengthening slightly to about ¥147.8 to the dollar.
Tuesday's strong performance in Tokyo — with the Nikkei 225 ending the day up 2.15%, at 42,718.17 — was in part triggered by a 90-day trade-war truce between the U.S. and China, Kamai said.
On Monday in Washington and Tuesday morning in Beijing, the White House and China's Commerce Ministry issued a statement extending the suspension of higher-rate tariffs on each other for another 90 days to allow for further negotiations.
'I think that was enough to trigger the Nikkei to break new record highs,' Kamai said. 'And then once you break the new record highs, and you see short covering, you see retail buying leveraged ETFs, and then the momentum just builds up to the upside.'
On Tuesday, the United States reported that inflation remained steady in July and below expectations, raising hope that tariffs will have a limited effect on prices and allow the U.S. Federal Reserve to start lowering interest rates.
Inflation in the United States was 2.7% in July, the Bureau of Labor Statistics reported, lower than the 2.8% forecast by analysts and the same as the June figure.
In overnight trading, the Nasdaq Composite index and the S&P 500 index both closed at record highs following the release of the inflation data.
A trade deal reached between Japan and the United States on July 22, and subsequent clarifications of the terms of that deal, have also continued to support stocks, Kamai said.
'There's a little bit more, I guess, belief that the rally can continue,' he added.
Risks still exist given that trade relations between Japan and the U.S. remain 'murky,' he noted, adding that the market tends to overlook underlying risks these days.
The two countries remain at odds over the exact meaning of Japan's $550 billion investment pledge included in the trade agreement, while a drop in auto tariffs has been promised by the United States but not yet implemented.
'The headline risks are definitely out there, so any kind of negative headlines will probably see a quick turnaround in terms of profit taking,' Kamai said.
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