Japanese Stocks Jump After U.S. Stages Biggest Rally Since 2011

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  • Investors soothed by dovish words from the Fed's Dudley
  • Food-related companies lead gains after brokers raise outlook

Japanese stocks jumped for a second day, with the Topix index capping the biggest two-day rally since November, as a U.S. equity rebound bolstered investor appetite for risk assets.

Food-related stocks led gains, with Suntory Beverage & Food Ltd. climbing 4.3 percent. Toyota Motor Corp. strengthened for a second day after announcing plans to re-start production in Tianjin, China. Dai-ichi Life Insurance Co. advanced 2.9 percent after Mitsubishi UFJ Financial Group Inc. said the insurer is likely to revise earnings higher. Shimano Inc. surged 6 percent after a broker upgraded its outlook on the maker of bicycle parts.

The Topix climbed 1.5 percent to 1,500.41 at the close in Tokyo, bringing its two-day gain to 4.7 percent, the most since Nov. 4. The Nikkei 225 Stock Average added 1.1 percent to 18,574.44. Shares in the U.S. staged the biggest rally since 2011, halting a six-day rout, as a Federal Reserve policy maker signaled a September interest-rate increase is less likely amid market turmoil and weakening Chinese economic growth.

“The consensus now is that a September rate hike probably won’t happen,” said Mitsushige Akino, an executive officer at Ichiyoshi Asset Management Co. in Tokyo. “This means we get to keep the excessive liquidity that’s been supporting markets for a little longer, so there’s a feeling of relief."

China Watch

Japanese investors will be watching Chinese equities, and continued declines in Shanghai would weigh on sentiment, Akino said. On Thursday, the Shanghai Composite Index whipsawed between gains of 3 percent and losses of 0.7 percent.

Concern about the outlook for the world’s second-largest economy has roiled global markets since China unexpectedly devalued its currency more than two weeks ago. The turmoil has weakened the case for raising U.S. rates in September, Fed Bank of New York President William C. Dudley said, cautioning that it’s important not to overreact to short-term developments.

Investors have scaled back their expectations for a Fed move next month. Trading in federal funds futures implied about a 24 percent probability that the central bank will move in September, compared with almost 50 percent on Aug. 11.

“The current sell-off has been a plea from the markets for a special policy response,” said Tatsushi Maeno, head of Japanese equities at Pinebridge Investments Japan Co. in Tokyo. “If the Fed says next month it won’t raise rates, that will be a plus. We’ve seen China respond with a monetary move, but a big fiscal response would also boost confidence among market participants.”

Food Upgrades

Broker upgrades boosted optimism in food-related companies, which led gains among the 33 Topix industry groups. Suntory advanced 4.3 percent after Nomura Holdings Inc. boosted its price target on the beermaker, citing a recent acquisition and strong domestic sales for the upgrade. Kewpie Corp. jumped 5.7 percent after SMBC Nikko Securities Inc. said risks in the egg market were receding and reiterated its positive outlook on shares of the mayonnaise manufacturer.

Toyota said it would restart production on Friday at China plants that were shut after explosions in the city of Tianjin. The closures have been costing the automaker$103 million a week, according to calculations by Bloomberg. Shares rose for a second day, climbing 1.5 percent.

Dai-ichi Life Insurance gained 2.9 percent after Mitsubishi UFJ’s report. Other insurers also rose, including Tokio Marine Holdings Inc., which advanced 4.3 percent.

Shimano rose the most in two years, jumping 6 percent, after JPMorgan & Chase Co. raised its rating on the stock to overweight from neutral. The broker said the current market drop was a good opportunity to pick up shares as the company is likely to increase buybacks or dividends.

Futures on the Standard & Poor’s 500 Index 0.2 percent after the underlying measure soared 3.9 percent on Wednesday in New York, the most since November 2011. The index is still 7.8 percent below its close on Aug. 10, the day before China’s currency devaluation triggered the sell-off.