Tokyo surges to 30-year high as world shares rally

BANGKOK (AP) — World shares started the week off with a rally, as Japan’s Nikkei 225 index closed above 30,000 for the first time since August 1990.

European markets opened higher yesterday, following an advance in Asia. Shanghai and Hong Kong were closed for the Lunar New Year. United States (US) markets closed yesterday for Washington’s Birthday.

Optimism that Washington will come through on trillions of dollars of more aid for the economy and encouraging company earnings reports have helped stocks grind higher this month, along with hopes that the coronavirus vaccine rollout will set the stage for stronger economic growth in the second half of this year.

Democrats have decided to use a legislative process that does not require Republican support to pass the USD1.9 trillion package proposed by US President Joe Biden.

“Markets remain target fixated on the Biden stimulus and vaccine rollouts as the magic panacea for the world’s pandemic ills,” Jeffrey Halley of Oanda said in a commentary. That has translated into higher stock prices, with the world awash with stimulus funds seeking returns in a world where interest rates are around zero per cent, he said.

Germany’s DAX gained 0.3 per cent to 14,097.85 and the CAC40 in Paris rose 0.5 per cent to 5,733.72. Britain’s FTSE 100 surged 0.9 per cent to 6,651.04. US futures also rose, with the contract for the S&P 500 up 0.3 per cent. The future for the Dow industrials rose 0.4 per cent.

The strong buying in Tokyo was driven by news that the Japanese economy grew at a nearly 13 per cent annual pace in the last quarter, and by strong corporate earnings reports. It was the second straight quarter of growth after a downturn drastically worsened by the impact of the pandemic.

A man walks in front of an electronic stock board showing Japan’s Nikkei 225 index at a securities firm, in Tokyo. PHOTO: AP

The recovery should put the economy on track to recover to pre-pandemic levels by next year, helped by a recovery in demand for exports in the US and other major trading partners, Marcel Thieliant of Capital Economies said in a report.

Japan recently re-imposed a state of emergency in Tokyo and several other prefectures to battle a resurgence of outbreaks. But sustained corporate investment and government spending are expected to help offset the impact on travel, restaurants and other sectors most affected.

“And while most economists expect a renewed contraction this quarter due to the second state of emergency, we think that output will be broadly flat in Q1 and rise more strongly this year than almost anyone anticipates,” Thieliant said.

The Nikkei 225 closed up 1.9 per cent at 30,084.15. It was its highest level since August 1990, just as Japan’s bubble economy was beginning to implode after peaking at nearly 39,000 in 1989.

Other Asian markets also saw strong gains. The Kospi in Seoul rose 1.5 per cent to 3,147.00 and India’s Sensex climbed 1.1 per cent to 54, 102.41. In Australia, the S&P/ASX 200 rose 0.9 per cent to 6,868.90.

Thailand’s SET benchmark index gained 0.9 per cent after the government forecast the economy will expand by 2.5 -3.5 per cent this year after contracting 6.1 per cent in 2020 as the government restricted international travel and imposed other limits on activities to combat the pandemic.

On Friday, technology companies led a late-afternoon rally on Wall Street that capped a week of wobbly trading. with the major stock indexes hitting all-time highs.

The S&P 500 rose 0.5 per cent to 3,934.83, a record high for the second day in a row. It was its second straight weekly gain.

The tech-heavy Nasdaq composite picked up 0.5 per cent, to 14,095.47, also a record. The Dow Jones Industrial Average likewise set a new high, edging 0.1 per cent higher to 31,458.40. The Russell 2000 index rose 0.2 per cent, to 2,289.36.

A majority of companies have now reported their latest round of earnings and the results have been surprisingly good. Roughly 75 per cent of companies in the S&P 500 have released results, showing overall growth of 2.8 per cent, according to FactSet. That’s a sharp reversal from the 13 per cent contraction analysts had forecast in late September.

The yield on the 10-year Treasury rose to 1.21 per cent from 1.20 per cent late Friday.

US benchmark crude oil picked up USD1.26 to USD60.73 per barrel in electronic trading on the New York Mercantile Exchange.

It advanced USD1.23 to USD59.47 per barrel on Friday. Brent crude, the international standard, gained 99 cents to USD63.42 per barrel.

The US dollar rose to JPY105.22 from JPY104.99 late Friday. The euro strengthened to USD1.2139 from USD1.2123.