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Japan stocks jump on weak yen but Asia markets sink

Tokyo’s Nikkei rallied Tuesday as the dollar extended gains against the yen on fresh indications the Federal Reserve will lift interest rates again this year, while technology firms tracked a sector rebound on Wall Street.

However, most other regional markets struggled after Monday’s healthy gains, despite being given a positive lead from Wall Street where the Dow and S&P 500 closed at fresh record highs.

One of the key drivers of Monday’s US rally were comments from influential New York Federal Reserve Bank president William Dudley, who reaffirmed the bank’s plan to press on with its rate hikes and forecast of higher inflation.

He said that despite tepid price rises, he was confident that “if the labour market continues to tighten, wages will gradually pick up”.

“Hitting the right chords and sounding dismissive about the recent slowdown in inflation, an unrepentantly hawkish Dudley provided the USD bulls with enough fodder,” Stephen Innes, senior trader at OANDA, said in a note.

The remarks came after Fed boss Janet Yellen sounded a more hawkish tone than usual, while the central bank set out plans to wind down its asset holdings to suck cash out of the financial system.

The greenback jumped in US trade and kicked on in Asia, heading towards 112 yen for the first time since the end of May.

– Takata hammered again –
Tokyo stocks ended 0.8 percent higher, with exporters key winners thanks to the weaker yen, while tech firms bounced after two weeks of sharp losses.

However, airbag maker Takata plummeted 20 percent, meaning it has lost a third of its value in just two days following reports it will file for bankruptcy protection and sell its assets to a US company.

Japan’s Nikkei business daily said last week the company, with liabilities exceeding $9 billion, would make a formal decision about the filing at a board meeting this month.

Other major markets struggled, though. Hong Kong lost 0.2 percent, Sydney fell 0.8 percent and Seoul gave up 0.1 percent. Singapore was marginally lower while Wellington and Manila were also down.

Shanghai slipped 0.8 percent as investors await a decision by MSCI on whether to include it in its list of emerging market benchmark indexes.

The bourse has been denied for the previous three years over concerns about certain restrictions, despite Beijing providing greater access to its domestic, yuan-based capital markets.

MSCI said China still maintains problematic restrictions including a 20 percent monthly repatriation limit, which it called “a significant hurdle for investors,” and too many restrictions on new financial product offerings.

In early European trade London rose 0.1 percent, Paris added 0.4 percent and Frankfurt put on 0.3 percent.

– Key figures around 0720 GMT –
Tokyo – Nikkei 225: UP 0.8 percent at 20,230.41 (close)

Hong Kong – Hang Seng: DOWN 0.2 percent at 25,866.68

Shanghai – Composite: DOWN 0.8 percent at 5,757.30 (close)

London – FTSE 100: UP 0.1 percent at 7,528.80

Dollar/yen: UP at 111.62 yen from 111.54 yen at 2100 GMT

Euro/dollar: UP at $1.1158 from $1.1149

Pound/dollar: UP at $1.2745 from $1.2734

Oil – West Texas Intermediate: DOWN three cents at $44.17 per barrel

Oil – Brent North Sea: DOWN one cent at $46.90

New York – Dow: UP 0.7 percent at 21,528.99 (close)


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