Japan's Nikkei average achieved a historic milestone on Thursday, crossing the crucial 60,000 level for the first time. The index initially surged, propelled by robust gains in technology stocks, marking a high of 60,013.98.
However, the rally faced choppy trading conditions. After peaking, the index shed some of its earlier gains, showing little change by 0127 GMT. This came after the Nikkei had fallen as much as 0.7% earlier in the trading session.
Nikkei's Record High Paired with Broader Market Flatness
The primary catalyst for the initial rally was an improvement in global risk sentiment, following U.S. President Donald Trump's indefinite extension of the Iran ceasefire. The broader Topix index remained flat at 3,744.93, highlighting the disproportionate strength of the blue-chip Nikkei 225.This divergence was underscored by the so-called NT ratio, which hit a record high of 15.74 on Wednesday. This metric signals that the Nikkei's outperformance relative to the wider Japanese market continues to accelerate.
Technology Stocks Power the Market Breakout
The surge was predominantly led by Japan’s technology and semiconductor sectors. Artificial intelligence-related stocks, including SoftBank Group, jumped 6.4%.The chip-related segment also outperformed significantly. Advantest climbed 2.65%, while Tokyo Electron recorded a 1.76% gain. Fibre optic cable maker Fujikura added 0.65% to its value, demonstrating consistent investor interest in infrastructure tech.
Despite the tech lift, the overall market saw mixed performance. Out of 1,600 shares traded on the Tokyo Stock Exchange's prime market, 17% rose, 78% fell, and 3% remained flat. Fast Retailing, the owner of the Uniqlo brand, notably weighed on the index, falling 1.8%.
Lingering Geopolitical Risks Dampen Momentum
While optimism for the war's end fueled current buying, deep-seated geopolitical uncertainties remain a key concern for investors. Hiroyuki Ueno, chief strategist at Sumitomo Mitsui Trust Asset Management, warned that the Middle East situation presents ongoing risks.He pointed out that the U.S. Navy's blockade of Iranian ports remains in effect, and Iran recently seized two ships in the Strait of Hormuz. The Strait of Hormuz is not completely open, and oil prices continue to be high.
Outlook Depends on Domestic Demand Cues
While the Nikkei has successfully recouped all losses since the start of the U.S.-Iran war in late February, analysts caution that more support is needed. Investors are currently buying on optimism for the cessation of conflict.However, for the index to achieve further substantial gains, more positive cues are required. These cues must specifically support the fundamentals, particularly those related to lifting domestic demand-related stocks.
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