Japan shares surge to highest since 1990

Stronger-than-expected quarterly numbers from Walmart and growing optimism over the debt-ceiling negotiations helped push the S&P 500 Index and Nasdaq Composite to near nine-month highs Thursday, though the market has also started putting higher odds on another rate increase from the Federal Reserve in June.  The S&P 500 climbed 0.94% and the Nasdaq Composite jumped 1.21% while the Dow rose 0.34%.  European equity markets also registered solid gains, with the Euro Stoxx 50 index rallying 1.02%. 

Summary for 19.05.2023 

• Most Asian equity markets rose on Friday and were headed for a positive week amid optimism over raising the US debt ceiling. However, concerns over a slowing economic recovery in China and a hawkish Federal Reserve kept gains limited.  Japan’s Nikkei 225 outpaced its peers for a fifth straight session, rising 1% to its highest level since the 1990’s “bubble era.”  The rally was powered by a mix of strong corporate earnings, resilience in the Japanese economy and bets that the Bank of Japan will maintain its ultra-loose monetary policy.   
• European and US shares are on track to advance on Friday on optimism for a breakthrough in US debt-ceiling talks. 
• Oil prices rose in Asian trade on Friday and were on course to settle higher after a volatile week as optimism over raising the US debt ceiling largely offset fears of bloated supply and worsening economic conditions.  Traders also bought back into heavily discounted markets after four straight weeks of losses. 

• The Financial Times reported this morning that Ukrainian President Volodymyr Zelenskyy will be in the Japanese city of Hiroshima on Sunday to meet in person with leaders of the Group of Seven. 
• The annual inflation rate in Japan rose to 3.5% in April from March’s 6-month low of 3.2%, as food prices increased the most since August 1976.  Core inflation increased to a 3-month high of 3.4% in April from 3.1% in the previous two months, matching market forecasts while staying above the Bank of Japan’s 2% target for the 13^th month. 
• The number of Americans filing for unemployment benefits fell to 242,000 last week, down from an 18-month high of 264,000 and below market expectations of 254,000.  The latest reading indicated the labour market in the US remains relatively tight, potentially leading to upward pressure on wages.  
• The yield on the US 10-year Treasury note topped 3.6%, a level not seen in nearly two months, as the possibility of an interest rate hike by the Fed came again to the table.  Traders pushed the likelihood of a June hike to approximately 40% after Dallas Federal Reserve President Lorie Logan said current economic data doesn’t justify pausing the rate hiking cycle yet. 
• Walmart reported first-quarter adjusted earnings yesterday of $1.47 per share, about 15 cents above expectations, on revenue of $152.3 billion, also above expectations.  Its same-store sales rose 7.4%.  Walmart shares rose 1.3% and are up about 6.5% so far this year. 

• Also yesterday Alibaba reported mixed quarterly results, including weaker-than-expected revenue and said it plans to spin off its cloud division.  The group is facing slowing demand in China as the country’s digital markets mature and as it faces increased competition from other players.  Shares of the Chinese e-commerce company fell more than 5%. 
• Netflix shares rallied after it said Wednesday it had 5 million monthly active users for its cheaper, ad-supported subscription option.  Shares of the streaming services company jumped 9%.