Nikkei hits near 2-month high on deal to keep US govt open, trade hopes

Pedestrians are reflected on an electronic board showing Japan’s Nikkei average (top L), the Dow Jones average (top R) and the stock averages of other countries outside a brokerage in Tokyo, Japan. (Reuters pic)

TOKYO: Japan’s Nikkei soared to a near two-month high on Wednesday as optimism there won’t be a US government shutdown and there will be a US-China trade deal lifted risk appetites.

Oil explorer Inpex jumped 14% after sharply raising its net profit outlook for the year.

The Nikkei share average surged 1.5% to 21,185.59 at the midday break, after touching as 21,205.05, the highest level since Dec 18.

The broader Topix gained 1.0% to 1,588.79.

The agreement in principle in Washington to avoid another shutdown helped boost Wall Street overnight.

The sentiment was also improved by hopes the United States would reach a trade deal with China.

High-level trade talks in Beijing starting on Thursday will attempt to hammer out an agreement before a March 1 deadline for the US to impose higher tariffs on US$200 billion of Chinese goods.

“The same catalysts – developments surrounding the US government shutdown and US-China trade deals – have made the Japanese market volatile,” said Takuya Takahashi, a strategist at Daiwa Securities.

“Investors are taking heart from the positive note from Wall Street yesterday, but volatility could persist depending on more headlines related to the events.”

He also said the market has priced in Japanese quarterly earnings, with the season almost over.

According to Daiwa Securities, 152 out of 200 large companies that the brokerage covers, excluding SoftBank Group and other telecommunication firms, have reported a 1% drop pretax profits on average for April-December.

For the fiscal year ending March, they expect their profits to be flat.

Wednesday’s winners include index-heavy stocks such as SoftBank Group and Fanuc soared, rising 6.1% and 3.5%, respectively.

Inpex hiked its full-year net profit forecast by 37% thanks to its Ichthys liquefied natural gas (LNG) project in Australia.

Inpex was the board’ biggest gainer and made the mining sector the top sectoral performer.

Kabu.com Securities rose 6% after KDDI said on Tuesday it would spend US$800 million to buy a minority stake in Kabu.com.

The broader Topix gained 1.1% to 1,589.45.