Japanese shares surged to a 30-year high on Monday, driven by strong earnings and robust offshore demand. The Nikkei index experienced a three-week winning streak, climbing 8.8% for the month, while the Topix was not far behind. Financial shares led the gains as investors anticipated an eventual end to negative interest rates, while auto manufacturers benefited from a weak yen and increased exports.
Meanwhile, MSCI’s index of Asia-Pacific shares outside Japan rose by 0.1%, following a 2.8% increase last week to a two-month high. The upcoming Black Friday sales will be a test for the consumer-driven US economy, although thin markets are expected due to the Thanksgiving holiday.
In other news, media reports suggest that Israel, the United States, and Hamas have tentatively agreed to release hostages in Gaza in exchange for a five-day ceasefire. However, there has been no official confirmation of this agreement yet.
Looking ahead, expectations for an easing of monetary policy in the US have increased, with markets pricing out the risk of a further interest rate hike in December or next year. Furthermore, futures data shows speculative accounts have increased their short positions on the yen, suggesting the possibility of a squeeze on these positions.
In Europe, closely watched surveys of manufacturing are set to be released this week, and any signs of weakness could encourage bets on early rate cuts from the European Central Bank. Moreover, Sweden’s central bank may consider hiking interest rates again, given high inflation and the weakness of its currency.
In commodity markets, oil prices rebounded from four-month lows on Friday amid speculation that OPEC+ would extend or increase production cuts into next year. Brent crude added 58 cents to reach $81.19 per barrel, while US crude rose 49 cents to $76.38 per barrel. Gold also saw a slight increase, reaching $1,982 an ounce.
Overall, Japanese shares reaching a 30-year high is a positive sign for investors. The strong earnings and offshore demand that fueled this surge indicate a promising outlook for the Japanese market. However, uncertainties remain, particularly surrounding geopolitical conflicts and central bank policies in various countries. Investors will be closely monitoring these factors as they navigate the financial landscape.
