Japan's Nikkei share average pulled back from a record intraday high on Monday, as investors cashed in on gains following a multi-day surge. The Nikkei reached a record high of 41,112.24 in a volatile trading session, but ended the day 0.32% lower at 40,780.70. The broader Topix index declined by 0.57% to 2867.61.
The initial positive sentiment was driven by robust performances in Wall Street's main indexes on Friday, sparked by U.S. labor data that was softer than anticipated, raising hopes for interest rate cuts possibly as early as September. The tech-heavy Nasdaq and the benchmark S&P 500 both achieved record highs. Some Japanese tech stocks mirrored the gains of their U.S. counterparts, aiding the Nikkei.
However, Maki Sawada, an equity strategist at Nomura Securities, noted a feeling that shares were slightly overbought. Investors opted to secure profits after Japan's main stock indexes notched five straight days of gains, hitting record intraday highs last week. The potential for yen appreciation could dampen the market if Federal Reserve Chair Powell's testimony is seen as dovish or if U.S. inflation data indicates further cooling later this week, according to Charu Chanana, global market strategist and head of FX strategy at Saxo.
"The potential for Japanese equities to outperform could diminish as the yen rebounds from its record lows," Chanana added. A weaker yen typically enhances Japanese exporters' overseas earnings upon repatriation. Among the Nikkei's 225 constituents, only 53 shares rose, while 171 fell. In specific stocks, electrical equipment maker Yaskawa Electric dropped 4.4% to become one of the poorest performers by percentage following disappointing revenue results. Chip-making equipment giant Tokyo Electron declined by 0.9%. Conversely, SoftBank Group increased by 0.4% after U.S.-listed shares of British chip designer ARM Holdings, in which the Japanese firm holds a 90% stake, hit an all-time high. Uniqlo parent firm Fast Retailing also nudged up 0.4%.
