Japanese equity futures rallied, after the Nikkei 225 Stock Average entered a bear market, as U.S. shares halted a global slide amid better-than-forecast economic data and growing speculation the Federal Reserve will signal plans to maintain record-low interest rates.
Futures on the Nikkei 225 expiring in September jumped 3.8 percent to 12,870 as of 3 a.m. in Osaka. The Japanese equity benchmark has fallen 20 percent, crossing the threshold investors define as a bear market, after reaching a five-year high on May 22. The broader Topix index slid 4.8 percent yesterday, its seventh move of at least 1 percent in the past 10 sessions.
Japan’s stock market “had quite a rout last night, but it seems as though investors are thinking they will follow the U.S.,” Thomas Garcia, head of equity trading at Santa Fe, New Mexico-based Thornburg Investment Management Inc., which manages $80 billion, wrote in an e-mail. “Japan has been extremely volatile this year. There’s been lots of big moves in both the stock market and the currency.”
The Standard & Poor’s 500 Index jumped 1.5 percent to 1,636.36 in New York yesterday, snapping a three-day losing streak, after data showed faster-than-forecast growth in retail sales and a drop in jobless claims. The MSCI All-Country World Index increased 0.3 percent, reversing an earlier 0.9 percent retreat.
U.S. equities extended gains after the Wall Street Journal reported that the Fed may “push back” on market expectations of higher interest rates. Fed Chairman Ben S. Bernanke has repeatedly said a reduction in the bank’s $85 billion in monthly bond purchases wouldn’t mean an end to record easing.
Concern central banks around the world will decide levels of stimulus are too high erased more than $2.5 trillion of stock value globally since May 21. Declines yesterday came after the World Bank cut its global growth forecast as emerging-market economies led by China slow.
Japanese stocks have fallen amid a strengthening yen, disappointment about Prime Minister Shinzo Abe’s delay in implementing a growth strategy and concern that the Fed will scale back stimulus. The Nikkei 225 is still up for the year, with a gain of 20 percent.
The yen retreated 0.4 percent to 95.71 per dollar at 5:46 p.m. in New York, snapping a three-day rally of 3.4 percent, its biggest since May 2010. The yen yesterday touched its highest level since the BOJ unveiled a plan in April to buy more than 7 trillion yen ($74 billion) of bonds every month in an attempt to secure 2 percent inflation.
U.S.-listed shares of Japanese companies rose yesterday, with the Bank of New York Mellon Japan ADR Index adding 2.1 percent. American Depository Receipts of Toyota Motor Corp. (TM:US), the world’s No. 1 carmaker, climbed 1.8 percent to $121.30. ADRs of Nomura Holdings Inc., Japan’s biggest brokerage, increased 3.5 percent to $7.92.
“It speaks very strongly to the strength of the U.S. market that it ignored what occurred in Japan,” Hank Smith, who oversees $7 billion as chief investment officer at Radnor, Pennsylvania-based Haverford Trust Co., said by telephone. “The Japanese market got ahead of itself this year. That trend couldn’t continue. There was a lot more speculative money driving that move and so you’re seeing some of that get unwound.”
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