Tokyo extends rally after solid US growth forecast

 02 Nov 2017 - 10:49

Tokyo extends rally after solid US growth forecast


Hong Kong: Tokyo's stock market was the Asian standout Thursday, building on a rally and buoyed by a strong US growth forecast and domestic corporate results as well as a weak yen.

Shares on the Nikkei 225 index added 0.5 percent to hit a fresh 21-year high, brushing aside concerns about overheating following their recent surge.

Investor sentiment was boosted by the US central bank's punchy assessment of "solid" economic growth while keeping its key policy interest rate unchanged.

Honda led the surge in Japanese equities, jumping more than five percent after it raised its annual profit outlook on strong motorcycle sales.

Sony shares added another 2.8 percent as the firm raised profit forecasts and announced plans to revive its robot pet dog.

The weak yen -- a positive factor for Japanese exporters -- was also behind the gains, brokers said. 

But trading was muted elsewhere in Asia, as traders braced for a series of key economic announcements.

Investors were looking to the imminent US House Republicans' tax reform announcement, confirmation of President Donald Trump's pick for the new Federal Reserve chair, and an important Bank of England meeting.

Hong Kong slipped 0.1 percent in afternoon trading, while Shanghai shed 0.4 percent, dragged down by heavyweight financial shares.

Seoul and Singapore were also down by 0.4 percent. 

However, Manila jumped an impressive 1.8 percent. The Philippines is a major producer of nickel ore, which has enjoyed a rally on anticipated demand growth for the metal used in powerful electric car batteries.

- Alibaba, Apple earnings -

Chinese internet giant Alibaba was due to release its third quarter earnings after Asian markets closed Thursday, with investors watching closely to see if heavy investment has yielded further rapid revenue growth.

Meanwhile on Wall Street, the world's biggest company Apple was also due to release earnings Thursday.

The Fed, as expected, kept interest rates unchanged as it reported the US was growing at a "solid pace". That statement solidified the view the US central bank is likely to raise interest rates in December.

The dollar strengthened on those developments Wednesday, lending support to Asian exports, although some of those gains were pared Thursday amid uncertainty about the prospects of US tax cuts.

Wall Street remained hopeful that Trump's ambitious tax plans -- due to be unveiled by House Republicans Thursday -- are moving closer to becoming reality, but a delay in the roll-out signalled potential trouble ahead.

The US central bank will remain in focus on Thursday with Trump's announcement of his choice to lead the Federal Reserve. 

The White House notified current Fed Governor Jerome Powell on Wednesday that he will be the nominee, replacing current Fed Chair Janet Yellen, according to a congressional source and US media.

Reports of Powell's expected nomination "will support Japanese shares", Okasan Online Securities said in a commentary, noting Powell is seen as holding a policy position close to current chair Janet Yellen, it said.

Elsewhere, the Bank of England is expected Thursday to deliver its first interest rate increase in more than a decade as it fends off Brexit-induced high inflation.