Japan’s Nikkei 225 races to record high

Today’s headlines

What’s happening: Japan’s stocks rose sharply this morning, taking the Nikkei 225 to a record high.

What happened: Market sentiment was lifted by the US releasing its inflation report, which fuelled speculations of a rate cut by the Federal Reserve in September.

Japan’s stock market was also supported by the latest economic reports from the country.

Why it matters: US data released on Tuesday showed that the annual inflation rate remained unchanged from the previous month at 2.7% in July. The figure came in lower than market expectations of 2.8%. However, core inflation climbed to a five-month high of 3.1% in July, from 2.9% in June and was higher than estimates of 3%.

The inflation report fanned speculations of rate cuts by the US central bank, not only in September, but also in October and December.

Data from Japan showed that sentiment among manufacturers rose for the second month in a row in August following a trade deal with the US, which slashed tariffs on cars and other products to 15%.

The Reuters Tankan index for Japanese manufacturers jumped to a reading of +9 in August, from +7 in July and +6 in June.

Producer prices in Japan rose 2.6% year-over-year in July, easing from the 2.9% gain in the previous month. However, the figure came in slightly above market estimates of 2.5%. The latest reading signalled moderation in producer inflation for the fourth consecutive month, sending it to its lowest level since August 2024.

Japan’s Nikkei 225 jumped 1.35% to trade at 43,293.09 this morning, while the TOPIX index climbed 0.93% to 3,095.02. Top gainers included Sanrio, Sony Group and Tokyo Electric Power.

What to watch: Investors now await the release of economic data on GDP growth rate, stock investment by foreigners and industrial production, due to be released on Friday. Japan’s economy, which shrank by 0.2% on an annualised basis in the first quarter, is expected to grow by 0.4% in the second quarter.

Analysts expect Japan’s industrial production to surge by 1.7% in June, following a 0.1% decline in the previous month.

The markets today

The Australian dollar in focus today ahead of jobs data

Context: The AUD/USD forex pair edged lower this morning amid strength in the US dollar.

Details: The US dollar had come under pressure on Tuesday after the latest economic reports raised speculations of rate cuts by the Federal Reserve next month. However, the greenback recovered slightly this morning, which weighed on the AUD/USD forex pair.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose slightly to 98.11.

On the economic data front, Australia’s value of new owner-occupier loan commitments for dwellings rose by 2.4% to A$54.7 billion in the second quarter, after a 1.8% decline in the previous quarter. The growth was led by gains in both first-time and repeat home buyers.

Australia’s wage price index surged by 3.4% year-over-year in the second quarter, in-line with the previous quarter. The figure came in above market expectations of 3.3%. Gains in both the public and private sectors resulted in the better-than-expected wage growth rate.

The AUD/USD pair edged lower to 0.6526 this morning, while the S&P/ASX 200 fell 0.52% to 8,834.40.

What to watch: Markets will monitor data on jobs report from Australia, scheduled for release on Thursday. Australia’s economy, which added just 2,000 jobs in June, is expected to add 25,000 jobs in July. Analysts expect Australia’s unemployment rate to ease to 4.2% in July, from 4.3% in June, while the labour force participation rate is expected to remain unchanged at 67.1% in July.

Tariff-related announcements and talks between the US and Russia will also remain in focus.

Other Markets: US trading indices closed higher on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 1.10%, 1.13% and 1.33%, respectively.

The news shaping the markets

President Volodymyr Zelenskyy said that Russia wants Ukraine’s full withdrawal from the eastern region of Donetsk as a part of a ceasefire agreement. The news sent the RUB/USD pair higher in forex trading this morning.

India’s stock market regulator said it aims to further ease regulations for foreign investors in a bid to attract more capital flows into the country. This lent support to the INR/USD forex pair.

Philippines’ net foreign direct investment jumped by 21.3% year-over-year to $0.6 billion in May, which sent the PHP/USD pair higher in forex trading this morning.

Germany’s current account surplus surged to €18.6 billion in June, from €7.5 billion in May, which lent some support to the EUR/USD forex pair.

South Korea’s unemployment rate declined to 2.5% in July, from 2.6% in June. However, the KRW/USD pair edged lower in forex trading this morning.

What else to watch today

Germany’s 10-year Bund auction (1330 UAE Time), South Africa’s retail sales (1500 UAE Time), US MBA mortgage applications (1500 UAE Time), EIA crude oil stocks change (1830 UAE Time), EIA gasoline stocks change (1830 UAE Time), EIA distillate stocks change (1830 UAE Time), EIA heating oil stocks change (1830 UAE Time) and 17-week Bill auction (1930 UAE Time), Brazil’s retail sales (1600 UAE Time) and business confidence (1800 UAE Time), Russia’s GDP growth rate (2000 UAE Time) and inflation rate (2000 UAE Time), Bank of Canada’s summary of deliberations (2130 UAE Time), as well as Argentina’s inflation rate (2300 UAE Time).