Topix Has Biggest Gain in Two Weeks as Yen Drops on Fed Hike Bet

  • Stock market is shifting focus to U.S. rate policy: Matsui
  • Trump’s speech offers few new proposals or spending details

Why Markets Should Be Ready for a Fed Rate Hike

Japan’s stocks had their biggest gain in two weeks after hawkish remarks from Federal Reserve officials bolstered investor confidence and U.S. President Donald Trump gave a speech with few new proposals.

The Topix index rose 1.2 percent to 1,553.09 at the afternoon close, led by electronics companies and automakers, as the yen slid for a third day. Fed Bank of San Francisco President John Williams said he expects a rate increase to receive “serious consideration” at a meeting this month. His comments were followed by Fed Bank of New York President William Dudley’s remark that the case for tightening monetary policy has become “a lot more compelling.”

“The market will be shifting its focus toward the Fed now,” said Tomoichiro Kubota, an analyst at Matsui Securities Co. in Tokyo. “We’ve already seen traders pricing in an increased likelihood of a March rate hike yesterday, but the focus will now be on whether we’ll see another increase in borrowing costs, especially with the jobs data coming up.”

Trump urged Americans to abandon conflict and help him remake the fabric of the country in his first address to Congress. The speech offered few new proposals and Trump made no suggestions on how he would pay for his plans, including a replacement of Obamacare, a tax overhaul including cuts for the middle class, $1 trillion in infrastructure investment and a large increase in defense spending.

“I think it’s fair to say that the event didn’t cause a lot of volatility,” Matsui’s Kubota said. “He mentioned investing in infrastructure, cutting corporate tax, tax on the middle class, but we heard no specific amount, details. The option volatility index is declining, and it looks like the market hasn’t been rocked.”

Summary

  • Nikkei 225 +1.4% to 19,393.54
  • Toyota Motor Corp. +1.6%; Fuji Heavy Industries Ltd. +3.3%
  • Fanuc Corp. +2%; Murata Manufacturing Co. +2.2%; Sony Corp. +1.5%
  • Shiseido Co. +3.9% after its retinol product is recognized by Japan’s Health Ministry to improve wrinkles, while Pola Orbis, which already has a similar product on the market, slumped 8%, the most in 6 years.
  • Banks advance; Mitsubishi UFJ Financial Group +1.3%; Sumitomo Mitsui Financial Group +1.3%; Mizuho Financial Group +0.4%

— With assistance by Livia Yap

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