Japan Market gains on upbeat offshore lead, yens soft tone

Headline indices of the Japan share market advanced on Wednesday, 18 July 2018, as investors continued value buying, thanks to gains on Wall Street and in Europe market overnight and yen depreciation to 113-zone against the dollar on following upbeat remarks from Federal Reserve Chairman Jerome Powell during his congressional testimony. Meanwhile, buying pressure amplified after reports that the European Union and Japan signed a broad trade deal Tuesday that will eliminate nearly all tariffs across a third of the global economy. Among TSE33 issues, 27 issues inclined, while 6 declined, with shares of Oil & Coal Products, Rubber Products, Air Transportation, Precision Instruments, Transportation Equipment, and Fishery, Agriculture & Forestry issues being notable gainers, while Mining, Foods, and Insurance issues were notable losers. Around late afternoon, the benchmark Nikkei 225 index inclined 0.8%, or 178.32 points, to 22,875.68. The broader Topix index of all First Section issues on the Tokyo Stock Exchange, meanwhile, rose 0.6%, or 9.60 points, to 1,754.65.

The European Union and Japan signed a broad trade deal Tuesday that will eliminate nearly all tariffs across a third of the global economy. Japanese consumers will pay lower prices for European wine and pork, while Japanese machinery parts, tea and fish will get cheaper for Europe. The deal has been in the works for years and contrasts with the more protectionist approach of U.S. President Donald Trump.

Shares of export-related players gained, thanks to yen depreciation against greenback. A weaker yen tends to help Japanese exporters' profits made abroad when repatriated.

CURRENCY NEWS: The Japanese yen depreciated against U.S. dollar on Wednesday, as investors' appetite for risk heaven currency dimmed on U.S. Federal Reserve Chairman Jerome Powell's positive remarks on the U.S. economic outlook. The dollar depreciated to 113.00-01 yen compared with 112.85-95 yen in New York and 112.34-35 yen in Tokyo on Tuesday.

OFFSHORE MARKET NEWS: US stock market closed higher on Tuesday, after Fed chair Jerome Powell reiterated his quiet optimism for the US economy. In testimony to the US Senate Banking Committee, Mr Powell said the outlook was bright and that Fed policymakers believe that "with appropriate monetary policy, the job market will remain strong and inflation will stay near 2% over the next several years". Investors focused on company earnings, which aside from Netflix were mostly good. The S&P 500 index rose 11.12 points, or 0.4%, to 2,809.55. The Dow Jones Industrial Average gained 55.53 points, or 0.2%, to 25,119.89. The Nasdaq composite jumped 49.40 points, or 0.6%, to 7,855.12.

The major European markets also ended higher on Tuesday. The STOXX600 index lifted up 0.2%. The German export-focused DAX index gained 0.8%. The UK FTSE index rose by 0.3%.

COMMODITY NEWS: Crude oil price was little changed on Tuesday after a period of volatility. Benchmark U.S. crude erased an early loss and finished little changed at $68.08 a barrel in New York. Brent crude, used to price international oils, picked up 0.4% to $72.16 a barrel in London.

Base metal prices mostly declined on the London Metal Exchange on Tuesday due to US dollar strength. Aluminium was the worst performer (-1.9%), but zinc rebounded by 1.3%. Gold dripped 1% to $1,227.30 an ounce. Silver sank 1.2% to $15.62 an ounce.

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