Nikkei Tops 70,000 at Close, Hits Three-Month High as Wall Street Rally and Cheaper Oil Lift Tokyo Stocks

TOKYO — Japan's benchmark Nikkei 225 stock index closed above the 70,000 mark on Tuesday, reaching a three-month high as gains on Wall Street and a pullback in oil prices lifted investor sentiment.

The Nikkei rose 737.12 points, or 1.05%, to close at 70,683.98. It was the index's second straight day of strong gains, after it jumped 2.4% on Monday to 69,946.86, its highest close since early July.

On Monday, the index briefly climbed above 70,000 during trading but slipped back below the level by the close. Tuesday's finish marked a clean break above the closely watched round number.

The index has now gained about 2.5% so far this week and more than 3.5% since last Wednesday. It remains below its record intraday high of 72,831.73, set on June 22.

Broad gains

Unlike some recent sessions, when gains were concentrated in a few heavyweight technology stocks, Tuesday's advance was more widespread.

Rising stocks outnumbered declining ones by 2,273 to 1,177 on the Tokyo Stock Exchange, with 279 unchanged, according to Investing.com data. Real estate, banking and textile stocks were among the sectors leading the market higher.

At the end of the morning session, the broader Topix index was up 0.4% at 4,163.61, outpacing the Nikkei's modest 0.2% gain at the time. Among the Nikkei's 225 components at midday, 140 rose and 82 fell.

Electronic component maker Taiyo Yuden was the top gainer on the Nikkei, rising 6.15% to 11,135 yen.

Technology stocks were mixed. Chip-testing equipment maker Advantest gained 1.7% in the morning session, building on a record high set Monday. SoftBank Group, the technology investor that holds a large stake in OpenAI, fell 2.7% in the morning as investors took profits after recent gains.

The Nikkei Volatility index, which measures expected swings in the market based on options prices, rose 1.28% to 22.87.

Wall Street and oil

Tokyo stocks followed another strong session in the United States, where gains in megacap technology stocks pushed the Nasdaq to a record high on Monday. The S&P 500 rose 0.66% and the Nasdaq gained 1.05%.

Shares of SpaceX, Tesla, Nvidia and Broadcom were among the leaders on Wall Street.

Lower oil prices also helped. U.S. crude fell about 2% on Monday to around $89 a barrel, while Brent crude settled near $100, after Saudi Aramco cut its prices for Asian buyers to a six-year low. Japan imports nearly all of its oil, so lower crude prices tend to benefit Japanese companies and consumers.

Energy markets remain volatile because of the conflict involving Iran and disruptions to shipping through the Strait of Hormuz.

Fed bets ease

The rally in Tokyo began last week, when strong results from U.S. memory chipmaker Micron Technology sparked a surge in Japanese chip stocks. The Nikkei jumped 3.3% on Thursday as Advantest, Lasertec and Tokyo Electron soared.

Momentum continued after Friday's weaker-than-expected U.S. jobs report. American employers added just 29,000 jobs in September, and figures for the previous two months were revised down by a combined 60,000.

The soft data reduced expectations that the Federal Reserve would raise interest rates at its October meeting, easing pressure on global stocks.

However, long-term U.S. bond yields continued to climb. The 10-year Treasury yield hit 5.35% on Monday, its highest level since April 2002, as strong services data kept the possibility of further Fed rate hikes alive.

Japanese bonds in focus

Investors in Tokyo were also watching the Japanese government bond market, where yields have climbed to their highest levels in decades.

Japan's 10-year yield hit 3% last month for the first time since 1996, driven by concerns about rising inflation linked to energy costs and expectations that the Bank of Japan will raise rates faster.

Worries about the expansionary fiscal policies of Prime Minister Sanae Takaichi and a selloff in French government debt have also pushed yields higher.

The Japanese Finance Ministry held an auction of 10-year government bonds on Tuesday, which investors watched as a test of demand.

Some strategists believe yields may be close to peaking. Citi strategist Tomohisa Fujiki said "JGBs are becoming a more attractive investment," according to Bloomberg, adding that fair value for the 10-year yield would be 2.5% to 3% if inflation settles near 2%.

Ueda speech ahead

Attention now turns to Bank of Japan Governor Kazuo Ueda, who is scheduled to give a speech after Tuesday's market close. Investors will be looking for clues about the pace of future interest rate increases.

The central bank has been gradually raising rates as it moves away from years of ultra-loose monetary policy. Higher rates could strengthen the yen, which would weigh on the profits of Japanese exporters.

The yen traded around 157.80 to the dollar on Monday, near levels that have raised concerns among Japanese officials in the past. A weak yen tends to support exporters such as automakers and electronics companies by making their products cheaper abroad and boosting the value of overseas earnings.

Regional markets

Other markets in the Asia-Pacific region also rose. Australia's S&P/ASX 200 gained 0.57% to 8,735.7, its third straight session of gains, led by property and mining stocks, even as consumer confidence in Australia slumped following a rate hike by the Reserve Bank of Australia.

Investors will watch for minutes from the Federal Reserve's September meeting, due Wednesday, as well as the start of the third-quarter earnings season in the United States and Japan.

Japanese markets will be closed next Monday, Oct. 12, for the Sports Day holiday.

Analysts say the Nikkei's ability to hold above 70,000 could depend on continued strength in technology shares, the direction of bond yields and signals from both the Fed and the Bank of Japan.