Japan stocks continued the recent rally, reaching its highest level since August 18 after the latest macro data and Micron earnings. The blue-chip Nikkei 225 Index jumped to 68,567, up by 9.7% from its lowest level in September this year.
Japan stocks jump as catalysts align
The Nikkei 225 Index is rising as investors react to the latest macro data from Japan. A report by the Bank of Japan (BoJ) showed that the Tankan all big industry capital expenditure rose 11.3% in the third quarter, missing the expected 12.3%.
Another report showed that the manufacturing PMI slowed slightly to 54.1 from the previous month’s 54.9. The Bank of Japan also released minutes of its last meeting in which officials decided to hike interest rates by 25 basis points.
The Nikkei 225 Index is also rising as crude oil prices stabilize. Brent, the global benchmark, dropped to $97, while the West Texas Intermediate (WTI) retreated to $89.57. These prices dropped as traffic through the Strait of Hormuz continued rising.
Lower oil prices are bullish for Japan stocks because the country imports all of its oil. Before the US-Iran war, most of the oil came from Middle East countries like the United Arab Emirates (UAE) and Saudi Arabia.
Meanwhile, companies in the AI space are doing well after the strong Micron earnings. Ina statement, the company said that its revenue surged to $54.3 billion in the fourth quarter, higher than the expected $50 billion.
Most of this growth came from its data center business, which has continued doing well amid the AI boom. In a statement, Hendi Susanto, an analyst at Gabelli Funds said:
“At this point, I have not heard any negative data points pointing to the memory cycle reversing toward a decline anytime soon for the foreseeable future.”
The report fueled gains in AI stocks in Japan. Softbank stock jumped by 3.5%, while Kioxia Holdings, Tokyo Electron, and Advantest soared by 4.45%, 4.75%, and 7.50%, respectively. Murata Manufacturing also jumped by over 6%.
The same trend is happening in South Korea, where companies like Samsung Electronics and SK Hynix jumped by over 5%.
Nikkei 225 Index technical analysis
Technicals are supportive of the Nikkei 225 Index. It jumped to 68,569, its highest level since August 18 and much higher than last month’s low of 62,625.
The index has jumped above the descending trendline that links the highest swings since June 25 this year. It has also soared above the 50-day Exponential Moving Average (EMA), while the two lines of the MACD indicator have moved above the zero line.
Therefore, the path of the least resistance is upwards, with the next key target being 72,842, its highest level June this year. A move above that level will point to further gains towards 73,000.