Japan: Nikkei rebounds as Fed signals smaller hikes

December 01,2022

Japan share market finished session higher on Thursday, 01 December 2022, snapping four days losing streak, on following positive lead from Wall Street overnight after remarks by Federal Reserve Chair Jerome Powell indicating the central bank plans to slow its aggressive pace of interest rate hikes as soon as next month.

At closing bell, the 225-issue Nikkei Stock Average index advanced 257.09 points, or 0.92%, to 28,226.08. The broader Topix index of all First Section issues on the Tokyo Stock Exchange was up 0.89 point, or 0.04%, to 1,986.46.

Total 19 of 33 TSE sectors declined, with Real Estate, Insurance, Electric Power & Gas, Banks, Land Transportation, and Construction issues being notable losers. On the other side, Electric Appliances, Chemicals, and Precision Instruments issues were notable gainers.

Investors cheered as the US Federal Reserve Chair Jerome Powell indicated a slowdown in interest rate increases as soon as December, while Bank of Japan's board member, Asahi Noguchi, emphasized the need for economic support until nominal wages rise.

Powell suggested that the US central bank is preparing to raise its benchmark rate by 0.5 percentage points when its monetary policy committee gathers in December, after a string of 0.75-point increases.

Powell's remarks followed government data released earlier on Wednesday that showed a decline in job openings in October, indicating that this year's monetary tightening has slowed down the labour market.

Chip-related shares advanced on tracking the Philadelphia Semiconductor index's rally overnight. Tokyo Electron jumped 4.2% and Advantest rose 3.5%. Technology investor SoftBank Group climbed 2.3%.

Shares of insurance and banking sectors fell, as U.S. Treasury yields declined. Shizuoka Financial Group fell 3.7% and Fukuoka Financial Group lost 2.7%. Insurers Sompo Holdings 2.9% and MS&AD Insurance Group Holdings 2.4%.

Among individual stocks, Eisai shares rose 6.2%, extending its sharp gains from the previous session, as the drugmaker plans to seek full approval of its experimental Alzheimer's drug lecanemab in the United States, Europe and Japan.

ECONOMIC NEWS: The au Jibun Bank Flash Japan Manufacturing Purchasing Managers' Index (PMI) slipped to a seasonally adjusted 49.4 in November from a final reading of 50.7 in the previous month, and below the flash reading of 49.4. It was the weakest level since November 2020 and marked the first move below the 50-mark that separates contraction from expansion in 22 months.

CURRENCY NEWS: The Japanese yen strengthened against the dollar, following Fed Chair Jerome Powell's comments signaling smaller interest rate hikes could come as soon as the next meeting in December. The USD/JPY fell 1.2% in Asia's trading hours and last stood at 136.33.

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