Japan Nikkei gains as Powell hints interest rate hikes may taper off

Headline indices of the Japan share market advanced for fifth straight session on Thursday, 29 November 2018, on tracking an advance in Wall Street overnight spurred by remarks from Federal Reserve Chairman Jerome Powell who said he considers the central bank's benchmark interest rate to be near a neutral level. Meanwhile, buying momentum amplified on hope of a possible de-escalation of the U.S.-China trade dispute. In afternoon trades, the 225-issue Nikkei index advanced 201.44 points, or 0.9%, at 22,378.46. The broader Topix index of all First Section issues on the Tokyo Stock Exchange was up 13.21 points, or 0.8%, to 1,666.87.

The Japanese market took heart from a rise in U.S. shares overnight, where all three of Wall Street indexes surged after Federal Reserve Chairman Jerome Powell hinted that the Fed might not raise interest rates much further. In a speech to the Economic Club of New York, Federal Reserve Chairman Jerome Powell said that rates are close to "neutral," the level at which they neither hold back growth nor aid it. That might mean the Fed isn't planning to raise interest rates far above their current levels. Powell also appeared to suggest that the Fed might pause its cycle of interest rate increases next year so the central bank can assess the effects of its actions. That relieved investors who feel the nine-year-old bull market could come to an end if rates rise too fast.

 

Japanese investrs are keeping a close eye on the G-20 summit in Argentina on Friday when President Donald Trump and Chinese President Xi Jinping are expected to meet and discuss trade issues. The summit will be watched closely for how relations between both countries develop, in addition to further news surrounding Sino-US trade. China's main goal at the G20 meeting is to get the United States to refrain from raising the tariffs in January. Trump is open to a deal with China but is ready to impose more tariffs if the upcoming talks don't yield progress. Japan has close economic ties with both countries and the ongoing tariff spat threatens to dampen Japan's export sector.

CURRENCY NEWS: Japanese yen was little changed in the upper-113 yen zone against greenback on Thursday. The dollar was quoted at 113.56-57 yen compared with 113.63-73 yen in New York and 113.86-87 yen on Wednesday in Tokyo. The euro, meanwhile, fetched 129.09-10 yen against 129.13-23 yen in New York and 128.41-45 yen in Wednesday trade in Tokyo.

OFFSHORE MARKET NEWS: Wall Street stocks closed higher on Wednesday, after Federal Reserve Chairman Jerome Powell hinted that the Fed might not raise interest rates much further. The Dow Jones Industrial Average jumped 617.70 points, or 2.5%, to 25,366.43. The broad-based S&P 500 index surged 61.62 points, or 2.3%, to 2,743.79, its biggest gain since March 26, while the tech-rich Nasdaq Composite Index rose 208.89 points, or 2.9%, to 7,291.59.

The major European markets turned in a lackluster performance on Wednesday. The French CAC 40 Index closed nearly flat. The German DAX Index and the U.K.'s FTSE 100 Index edged down by 0.1% and 0.2%, respectively.

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