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Japan’s Nikkei records weekly loss as Fed outlook weighs

May 24, 2024

Key points:

  • Nikkei declines 1.17%, impacted by U.S. economic data.
  • U.S. 10-year bond yield climbs, influencing global markets.

Japan’s Nikkei share average fell sharply on Friday, reflecting declines on Wall Street. Strong U.S. economic data has stoked bets that persistent inflation may delay Federal Reserve interest rate cuts.

Picture: Nikkei in the slumps as seen on the VT Markets app.

The Nikkei index dropped 1.17% to 38,646.11 by the close, after dipping as much as 1.9% earlier in the session. The broader Topix index also declined, losing 0.44%. This downward movement mirrors the performance of U.S. equity indexes, which all fell overnight.

The Dow Jones Industrial Average led the decline with a 1.5% slump.

You might be interested: US stocks impacted by bond yields & Hawkish Fed comments

Rising input prices and bond yields shift rate cut expectations

U.S. manufacturers reported a surge in prices for various inputs, suggesting that goods inflation could rise in the coming months. This news pushed the benchmark U.S. 10-year bond yield to a more than one-week peak of 4.498%.

Consequently, traders have adjusted their expectations, now anticipating a single quarter-point rate reduction this year, down from a consensus of two cuts previously.

For the week, the Nikkei has lost 0.36%, though it remains up more than 15% for the year, ranking among the top-performing markets globally. The index reached an all-time high of 41,087.75 on March 22 before pulling back to as low as 36,733.06 over the following month.

Sector and stock highlights in May 2024

On Friday, chip stocks that had rallied the previous day on Nvidia‘s earnings retreated sharply, becoming some of the worst performers on the Nikkei.

Advantest dropped 4.5%, Tokyo Electron fell 2.8%, and Lasertec sank 4.5%.

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