Nikkei 225 jumps for 2nd session on tech rally

Today’s headlines

What’s happening: Japanese stocks rose sharply this morning amid a surge in tech and AI-related stocks.

What happened: Japan’s Nikkei 225 rallied for the second straight session mirroring gains in shares of US chipmakers and memory companies on Friday.

Investors also digested the latest economic data from Japan, while assessing Friday’s key jobs report from the US.

Why it matters: The tech-laden Nasdaq 100 index closed higher on Friday, driven by gains in the semiconductor sector.

Data released by the US on Friday showed that 162,000 jobs were added in August, the most gain in five months. The figure was much higher than the previous month’s 23,00 job adds and topped market estimates of 56,000. The US unemployment rate remained unchanged from the previous month at 4.1% in August, in-line with market estimates.

Meanwhile, Japan’s foreign reserves declined by a record $79.6 billion to $1.208 trillion at the end of August. This marked the lowest level since October 2022.

Markets widely expect the Bank of Japan to hike interest rates at its September meeting with persistent inflation and weakness in the yen.

Shares of top tech companies, including Lasertec Corp, Kioxia Holdings, Advantest and Tokyo Electron, climbed this morning. Open AI investor SoftBank Group also recorded gains.

Japan’s Nikkei 225 jumped around 2.3% to trade at 66,503.21 this morning, while the TOPIX gained 0.73% to 4,133.16.

What to watch: Investors will keep an eye on the BoJ’s monetary policy outlook.

Data on average cash earnings (0330 UAE Time), current account (0350 UAE Time) and GDP growth rate (0350 UAE Time) will be released by Japan on Tuesday. Average cash earnings in Japan, which surged by 3.4% year-over-year in June after a 3.3% gain in May, are expected to jump by 3.9% in July. While Japan recorded a trade deficit of ¥92.3 billion in June, analyst project a ¥2870 billion surplus in July. Japan’s economy is to grow at an annualised rate of 1.1% in the second quarter, decelerating from the previous quarter’s 1.9% expansion.

The markets today

The Canadian dollar in focus today ahead of some major economic releases next week

Context: The Canadian dollar slipped versus the US dollar this morning as investors digested Friday’s jobs data.

Details: Employment in Canada fell by 41,700 in August, compared to a 75,100 gain in the previous month. The figure also missed market estimates of a 15,000 gain.

Canada’s unemployment rate came in unchanged from the previous month at 6.4% in August, in-line with market estimates. The number of unemployed people surged by 4,800 to 1.455 million in the same period. The weak labour report raised speculations of a dovish stance from Canada’s central bank.

The Bank of Canada maintained its key policy rate at 2.25% at its latest meeting, in-line with expectations, but noted higher inflation risks due to fresh tariffs.

Other data released on Friday showed that Canada’s Ivey PMI jumped to 64.3 in August from 55.1 in the previous month, topping market estimates of 56.2. This marked the strongest reading since April 2022.

Strength in the US dollar weighed on the Canadian currency this morning. The US dollar index, which measures the greenback’s performance versus a basket of major peers, edged higher to 99.19.

Higher prices of crude oil, one of Canada’s major exports, lent some support to the loonie. Spot price for WTI crude oil rose more than 1% to trade at $90.26 per barrel this morning.

The USD/CAD forex pair edged higher to 1.3841 this morning, while the S&P/TSX Composite Index fell 0.33% to close at 36,513.80.

What to watch: Investors will keep an eye on the ongoing US-Iran conflict.

With no major economic releases due from Canada this week, investors await data on inflation rate and manufacturing sales next Monday. Canada’s headline inflation rate rose to 3% in July from 2.8% in the previous month, while manufacturing sales are expected to decline by 0.2% in July following a 0.1% gain in June.

Other Markets: European indices closed mixed on Friday, with the FTSE 100 and CAC 40 down by 0.01% and 0.09%, respectively, and the DAX 40 and STOXX Europe 600 Index up by 0.17% and 0.12%, respectively.

The news shaping the markets

Following talks with US envoys, Ukraine’s President Volodymyr Zelenskyy said he expects the war with Russia to continue into winter. The news sent the USD/RUB pair lower in forex trading this morning.

Colombia’s producer price index surged 0.76% year-over-year in August, easing from a 1.51% gain in the previous month, which exerted pressure to the USD/COP forex pair.

Eurozone’s retail sales declined 0.6% in July, following a 0.2% gain in the previous month. The latest reading missing market estimates of a 0.3% rise sent the EUR/USD pair lower in forex trading this morning.

UK’s S&P Global construction PMI fell to 44.3 in August from 44.7 in the previous month. The recent reading coming in short of market expectations of 45.5 exerted pressure on the GBP/USD forex pair.

Australia’s ANZ–Indeed job ads jumped 2.5% in August, accelerating from July’s revised 1.9% gain. However, the AUD/USD pair slipped in forex trading this morning.

What else to watch today

• Eurozone’s Employment Change (1300 UAE Time)
• Eurozone’s GDP Growth Rate (1300 UAE Time)
• Singapore’s Foreign Exchange Reserves (1300 UAE Time)
• Russia’s Foreign Exchange Reserves (1700 UAE Time)