Nikkei rides dragon’s tail of volatile market
It’s hard to ignore the Nikkei’s massive rebound on Wednesday.
The Japanese benchmark soared 7.7%, riding the dragon’s tail of a 2.3% recovery in Shanghai. The 225-issue Nikkei Stock Average ended up 1,343.43 points, from Tuesday at 18,770.51, marking its biggest one-day points gain in nearly seven years. The broader Topix index of all First Section issues on the Tokyo Stock Exchange finished 90.66 points, or 6.40 percent, higher at 1,507.37.
The Nikkei had tumbled 2.4% to a seven-month low Tuesday on the heels of a string of recent losses.
As elsewhere, the Tokyo market reacted to expectations that China’s dismal August trade data would spur Chinese officials to issue more stimulus measures. In the face of such volatility in global stocks, Asia Unhedged observes that investors will react to whatever news tumbles in — in this case export numbers that are so bad people think they might be good.
Tokyo stocks were able to rise so high in one trading day because they had been beaten down so low in the aftermath of the data, said Tsutomu Yamada, market analyst at kabu.com Securities Co. told the Nikkei Asian Review. “Tokyo only had a few hours to react to the data and bore the brunt of negative sentiment, but after the close Tuesday we saw other markets gain ground on Chinese stimulus expectations,” Yamada said.
Public pension funds jumped in the market to buy stocks. Investor sentiment was also fired by the eurozone’s April-June gross domestic product upgrade overnight from preliminary data, and hopes for Japanese corporate tax cuts after Prime Minister Shinzo Abe was returned unopposed as president of the ruling Liberal Democratic Party on Tuesday. Could Abe be sharpening more arrows? Asia Unhedged hopes not …