Tokyo stocks surge: Nikkei jumps 1.76% on renewed fed rate cut hopes

Indices

The main Asian indices are reflecting a complex mix of resilience and caution driven by shifting economic policies and global headwinds. The Nikkei 225 (^N225) is currently trading at 47672.67, posting a daily gain of 1.76179. This puts the index near its year high of 48597.08, although the micro-trend signal remains FLAT, suggesting a lack of strong near-term conviction after a period of bullish momentum. In China, the Hang Seng Index (^HSI) has advanced to 25912.87, with a notable increase of 1.85332, reflecting a technical rebound from recent lows. However, the index remains below its year high of 27381.84, and the short-term trend is also flat, underscoring ongoing investor caution. The Shanghai Composite Index (SSEC) is at 3399.77, up 0.43, signaling modest optimism following recent policy support.

Stocks

Stock-specific activity is shaping sectoral sentiment across both markets. In Hong Kong, Xiaomi Corp (1810) experienced heavy trading with a decline of -5.71, driven by negative headlines regarding safety incidents involving its SU7 electric vehicle. Other major laggards in the Hang Seng Index include WuXi AppTec H (2359) at -5.87, reflecting sector-wide pressure in healthcare and technology. Conversely, SMIC (0981) posted a gain of 3.35, and Zijin Mining Group (2899) rose 1.72, with the latter benefiting from robust gold prices and safe-haven demand.

In Japan, the leading gainers are found in industrials and healthcare, with Disco Corp. (TYO:6146) rising 7.5 and Sumitomo Metal Mining (TYO:5713) up 6.87. However, semiconductor stocks such as Tokyo Electron (TYO:8035) and Advantest Corp. (TYO:6857) have seen sharp declines of up to -7.6, highlighting continued volatility tied to global supply chain issues and trade tensions.

Economic News

Recent economic data has played a pivotal role in shaping market direction. In Japan, the Leading Economic Index for July improved to 106.1, indicating a tentative recovery in forward-looking indicators. Industrial production surged by 4.1, while retail sales year-over-year fell -1.1, underscoring persistent weakness in consumer demand. In China, the World Bank's upward revision of the 2025 GDP growth forecast to 4.8 has provided a measure of support, although recent trade tensions—triggered by the U.S. imposition of 100% tariffs on Chinese exports—have induced sharp equity sell-offs and heightened volatility. Chinese corporate governance reforms and increased dividend payouts have helped partially offset negative sentiment, with the average dividend yield rising to 2.8, signaling a more shareholder-friendly environment.

Economic Events

Key economic events this week include policy meetings and data releases that could reshape market expectations. In China, the National People's Congress is underway, with investors awaiting policy guidance and potential stimulus announcements. The release of China's Foreign Exchange Reserves for September is also anticipated, with an estimated value of 3.31, which will be closely watched for signs of capital flow stability. In Japan, attention is focused on communications from the Bank of Japan, including a scheduled speech by BoJ’s Noguchi and the release of the BoJ Summary of Opinions, both of which are expected to clarify monetary policy direction amid shifting fiscal debates.

Market Sentiment

Overall market sentiment across Asia remains mixed and cautious. The modest gains in the Shanghai Composite Index and Hang Seng Index indicate pockets of optimism driven by policy support and revised growth forecasts. However, the prevailing flat micro-trend signals for the Nikkei 225 and Hang Seng Index reflect a broader wait-and-see attitude, with investors hesitant to take on new risk in the face of persistent trade tensions, sector-specific volatility, and global macroeconomic uncertainty. The technology and electric vehicle sectors in particular are under pressure from both regulatory scrutiny and competitive headwinds, while safe-haven assets and defensive stocks are seeing renewed interest.

Please note that the analysis is for informational purposes only and does not constitute financial advice. Users should conduct their own research.