Nikkei 7.7% surge biggest one-day gain in 7 years
This article by Peter Wells for the Financial Times may be of interest to subscribers. Here is a section:
Analysts in Tokyo said the sharp rise in Japanese markets reflected the low closing level on Tuesday and a large amount of short covering.
“The background is a rise in Chinese shares yesterday, which spread to Europe and the US, then back to Japan,” said Mr Motomura, who noted that Nikkei 225 futures had already rallied above 18,000 in Chicago before the Japanese market opened.
Tomohiro Okawa, Japan equities strategist at UBS in Tokyo, said the market had been behaving strangely since the previous day. “I don’t think there’s a big change in trend,” he said.
The Shanghai Composite closed 2.3 per cent higher, while the tech-heavy Shenzhen Composite added 3.3 per cent. Hong Kong’s Hang Seng rose 4.1 per cent for its biggest one-day gain since December 1 2011.
Elsewhere around the region, Australia’s S&P/ASX 200 added 2.1 per cent for its third-best day of the year, Korea’s Kospi gained 3 per cent for its best day since December 21 2011 and Taiwan’s Taiex jumped 3.6 per cent for its second-best day of 2015.
The Nikkei-225 lost momentum from June and pulled back sharply in August to complete a Type-2 top. Following a major reaction against the prevailing trend market participants cast around for reasons for why the drawdown was so abrupt. In this case the reasons did not have a great deal to do with Japanese equities but more with closing out of carry trades which saw the Yen strengthen which in turn hit stops.
The Yen has since encountered resistance in the region of the 200-day MA and the Nikkei-225 bounced emphatically today to confirm a low of at least near-term significance. A sustained move back above 19000 would signal a return to demand dominance beyond the short-term.
The 2nd Section Index which so often leads has also stabilised above its late August lows. This is the first time either index has spent any significant time trading below the trend mean since breaking out in 2012. As such this represents at least a warning shot across the bows for the medium-term uptrends and their success in holding the August lows represents a significant point of reference for those holding long positions.
