Nikkei Extended Rally to Fourth Day, Japan's Service Sector Contracted In June

Akira Ito
03 Jul, 2024
Tokyo

Investors bid up stocks in Tokyo and overlooked the latest update on the service sector. 

The Nikkei 225 and the Topix indexes jumped following the gains in overnight trading in New York that pushed the S&P 500 index and the Nasdaq Composite to new record highs. 

Tech stocks led the gainers amid optimism about earnings, and mega-cap stocks in the sector led the market's advance. 

The yen drifted to a new 38-year low of 161.85 against the U.S. dollar as the Bank of Japan's policymakers struggled to devise a plan to shrink the yield gap between the U.S. and Japan. 

The au Jibun Bank Japan Services PMI for June was revised down to 49.4 from the preliminary estimate of 49.8, S&P Global reported Wednesday. 

The service sector activity contracted for the first time since August 2022, after all sub-sectors excluding information and communication shrank in the month. 

The index reversed from 53.8 in May. 

The input costs in the service sector rose to a 10-month high, but the prices charged to customers rose at the slowest pace since November 2023. 

Market indexes in Tokyo have faced selling pressure in the second quarter as foreign investors lighten positions and look elsewhere in the region to China and India. 

Despite the gains in the Nikkei 225 index over the last four days, investors are cautious because of the lack of progress on corporate governance reform and interest rate uncertainty. 

Moreover, the Bank of Japan is set to reduce its Japanese government bond buying as early as next month. 

 

Japan Stock Movers 

The Nikkei 225 stock average increased 1.2% to 40,567.79, and the Topix index added 0.4% to 2,868.18. 

Retail stocks were in focus after the yen hovered at a 38-year low, and the upsurge in foreign tourists from China, the U.S., and South Korea is expected to boost revenue this summer. 

The number of U.S. tourists visiting Japan by air rose 17.4% to 900,000 in the first five months to May 2024, according to the data released by the International Trade Administration. 

The U.S. arrivals soared 35.5% from the previous pre-pandemic peak in 2019, after Japan ended its travel restrictions and dropped to a multi-decade low. 

Fast Retailing jumped 1.8% to ¥42,120.0, J. Front Retailing gained 0.4% to ¥1,910.50, Takashimaya declined 0.3% to ¥2,943.50, and Seven & I Holdings advanced 0.2% to ¥1,977.50. 

Tech stocks were among the leading gainers following the rise in the sector in overnight trading in New York. 

Tokyo Electron, Advantest, Screen Holdings, and Disco Corp. advanced between 1.5% and 3.0%. 

Exporters fell despite the yen's weakness. 

Panasonic, Canon, and Sony declined more than 1%, but Mitsubishi Electric advanced 1%. 

TDK, Chugai Pharma, IHI, Murata Manufacturing, and Mitsubishi Heavy Industries gained between 3% and 5%. 

However, NTT Data, Yokohama Rubber, and Chiba Bank declined more than 3%.