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Morning Brief: Nikkei 225 Approaches ¥26,000 as Global Stocks Rally

Nikkei 225 Ends Higher
Nikkei 225 Ends Higher

The Nikkei 225 index is up by more than 2% as the Japanese blue-chip index continues its strong bull run. It is trading at ¥25,910, which is the highest it has been since May 1991. It is just 90 points below the important milestone of ¥26,000. Today’s rally is partly because of the strong Japan’s Q3 GDP numbers released earlier today.

The data showed that the country exited its recession in the third quarter boosted by strong private consumption and exports. The Nikkei index is a major beneficiary of this since most of its constituent companies are the biggest exporters.

Most Nikkei 225 constituent companies are in the green today, with the best performers being Japan Post Holdings, T&D Holdings, Yokohama Rubber, Hino Motors, Mazda, and Mitsui. All these firms are up by more than 6%. On the other hand, the biggest laggards are Yahoo Japan, Trend Micro, Credit Saison, and Eisai, among others. Later today, the top companies in the index to watch will be Recruit Holdings and Japan Real Estate that will publish their earnings.

In Hong Kong, the Hang Seng index is also up by more than 0.60% as traders price-in a rebound in the city’s and mainland economy. The index is trading at h$26,322, which is the highest it has been in months. This rally is mostly because investors are optimistic that the city will continue thriving as a major financial hub even after the recently failed Ant Financial IPO.

Indeed, according to South China Morning Post, many investors have started to redeploy funds aimed for Ant to other stocks in the index. Like in the Nikkei 225 index, most companies in the Hang Seng are in the green today, with the best performers being Shenzhou International, Galaxy Entertainment, Sands China, and HSBC.

In Europe, futures tied to the DAX index and FTSE 100 are rising even as Germany and the UK continues to report high number of Covid cases. The top companies in the FTSE to watch this week will be Vodafone, Imperial Brands, and Royal Mail that will deliver their earnings this week.

In the United States, futures tied to the Dow Jones, Nasdaq 100, and S&P 500 are all up by more than 1% mostly because of hopes of a vaccine. The weaker dollar has also boosted sentiment on the three key indices.

Nikkei 225 technical outlook

On the daily chart, we see that the Nikkei 225 index has been in a strong upward trend recently. It has moved above the important resistance level of $24,125, which was the highest levels in December, January and February. It has also moved above all short and longer-term moving averages. Most importantly, the Average Directional Index (ADX) and the Relative Strength Index (RSI) have moved to the highest level since June.

Therefore, while the overall trend will remain being bullish, a pullback is also possible this week. If it does, the next key level to watch will be ¥25,500.

Nikkei index chart

Nikkei 225