Japan’s Nikkei index surged to a 34-year peak on Friday, reaching up to 38,678 points, just shy of its all-time high of 38,957 points in 1989. The index rose by 4.8% for the week, marking the third consecutive week of gains and a staggering 15.6% year-to-date. The surge was driven by an overnight rally on Wall Street, as US retail sales fell, fueling hopes of an interest rate cut as early as June.
Nomura has forecasted that the Nikkei could reach 40,000 points by the end of the year, citing reasons such as an end to deflation in Japan, global investment shifting away from dependence on Chinese equities, and improvement in Japanese corporate governance. Meanwhile, other Asian markets have also seen an upward trend, with MSCI’s broadest index of Asia-Pacific shares outside Japan rising 0.3% and heading for a 1.4% weekly gain.
The fall in US retail sales last month, which saw a sharp drop by 0.8% in January, the steepest decline in 10 months, has renewed market expectations of a rate cut by the US Federal Reserve. This boosted Wall Street, with the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average all registering gains overnight.
As a result of the interest rate cut expectations, the US dollar lost 0.4% against its peers, and the Japanese yen rose to 149.9 per dollar. The yield on benchmark US 10-year Treasury notes was little changed at 4.2496%, while the yield on two-year Treasury notes edged 2 basis points higher to 4.5930%.
Japan and Britain both slipped into recession at the end of last year, and the fall in US retail sales further contributed to the market’s anticipation of potential rate cuts. These developments are closely being monitored by investors and analysts as they assess the impact on global markets.
The Nikkei’s climb to a 34-year peak has highlighted its resilience and potential for further growth amid shifts in global economic conditions. The anticipation of an interest rate cut in the US has injected optimism into the market, shaping the trajectory of stock indices and currency movements.
