Japan Nikkei rises after Fed comments, ahead of Trump-Kim summit

Headline indices of the Japan share market were higher on Wednesday, 27 February 2019, shrugging off a sluggish lead from Wall Street overnight, as investor risk sentiments underpinned after Federal Reserve chairman testimony that official US interest rates will remain on hold for now. Total 22 subsectors out of 33 subsectors of the Tokyo Stock Exchange inclined, with shares in Pharmaceutical, Construction, Electric Power & Gas, Real Estate, and Land Transportation issues being notable gainers, whereas Machinery, Mining, and Electric Appliances issues were notable losers. Around late afternoon, the 225-issue Nikkei Stock Average inclined 106.46 points, or 0.5%, at 21,555.85. The broader Topix index of all First Section issues on the Tokyo Stock Exchange added 3 points, or 0.2%, at 1,620.20.

Overnight on Wall Street, the Dow Jones Industrial Average slipped 33.97 points to close at 26,057.98 while the S&P 500 shed 0.1% to finish its trading day at 2,793.49. The Nasdaq Composite closed fractionally lower at 7,549.30. The moves stateside came amid disappointing earnings, mixed U.S. economic data as well as a testimony from Fed Chair Jerome Powell.

 

The Fed is in "no rush to make a judgment" about further changes to interest rates, Powell told US lawmakers on Tuesday as he spelled out the central bank's approach to an economy that is likely slowing. The US economy expanded by an estimated 3% in 2018 and official US interest rates are set at a range of 2.25 to 2.50%. In two hours of testimony to the Senate Banking Committee, Powell elaborated on the "conflicting signals" the Fed has tried to decipher in recent weeks, including disappointing data on retail sales and other aspects of the economy that contrast with steady hiring, wage growth, and ongoing low unemployment.

Mr Powell warned of slowing growth overseas that may hurt the US economy and said the Fed will be patient when deciding whether or not to raise interest rates again. He warned that uncertainty remained over issues such as Brexit and the US-China trade dispute and he said the Fed would carefully monitor developments. "We have the makings of a good outlook and our (rate-setting) committee is really monitoring the crosscurrents, the risks, and for now we are going to be patient with our policy and allow things to take time to clarify," Mr Powell said. The US central bank increased interest rates four times last year.

More evidence of the hot and cold economy was in evidence overnight, with weaker-than-expected US housing data and a rosy consumer confidence report.US homebuilding tumbled to a more than two-year low in December as construction of both single and multi-family housing declined, which overshadowed the rebound in consumer confidence in February after three months of declines.

Investors will be keeping an eye on the US-North Korean summit, scheduled to kickoff in Hanoi later on Wednesday. US President Donald Trump and North Korean leader Kim Jong Un were due to meet for their second summit, betting that their personal relationship can break a stalemate over the North's nuclear weapons and end more than 70 years of hostility. Experts say, however, they don't have high expectations from this week's meeting, set to take place in Hanoi on Wednesday and Thursday.

China and Europe are particular areas of concern, and the Fed is watching how Brexit negotiations and trade talks play out. The implicit message would appear to be that if the US and China can achieve a trade deal and global growth and markets rebound, then the Fed might again consider rate hikes.

In company news, Shares of Fast Retailing, the company behind the Uniqlo chain of apparel stores, gained more than 2%.

CURRENCY NEWS: The Japanese yen strengthened against the dollar on Wednesday. The Japanese yen traded at 110.57 after strengthening from lows above 111.0 yesterday.

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