Japan's Nikkei hits 22-month high
Japan's Nikkei share average climbed to a 22-month high on its first trading day of 2013, as a deal in Washington to avert the "fiscal cliff" buoyed investor risk appetite and the weaker yen lifted exporters such as Toyota.
The Nikkei ended up 2.8 per cent at 10,688.11, its highest close since March 4th, 2011. It was also the Nikkei's biggest daily percentage gain since March 22nd, 2011. Volume was high, with 3.41 billion shares changing hands on the board, compared with 2.85 billion shares traded in the final business week of 2012.
Exporters were in demand, with Toyota adding 6.4 per cent, Honda advancing 4 per cent and Canon gaining 2.4 per cent. "It's a relief that the US fiscal cliff was averted," said Hiroichi Nishi, general manager at SMBC Nikko Securities, noting that the market was cheering positive developments that happened while Japanese markets were closed for the New Year holidays this week.
"Exporters should benefit from a weaker yen on expectations that they will have strong forecasts for the next fiscal year."
On Wednesday, US president Barack Obama signed "fiscal cliff" legislation that raises tax rates for top earners and extends tax cuts for the middle class. The yen traded at 87.83 yen to the dollar this morning, its weakest since July 2010. A weaker yen inflates exporters' overseas earnings when repatriated.
Yasuo Sakuma, chief executive of Bayview Asset Management, said carmakers and consumer electronics such as Nikon and Canon would attract strong buying on the back of the weaker yen. "Among exporters, consumer products may outperform compared with, say, machinery makers," Mr Sakuma said.
"Investors prefer them to manufacturers like semiconductor manufacturing equipment, whose customers are companies that are still saving on capital spending."
European stock index futures pointed to a slightly lower open today as concerns that the US Federal Reserve may end its asset-buying programme
ahead of time curbed appetite for shares in the run up to key US jobs data.