A pedestrian walks past an electronic stock board displaying the Nikkei 225 Stock Average and the Shanghai Stock Exchange Composite Index in Tokyo, Japan. Picture: BLOOMBERG/TOMOHIRO OHSUMI
A pedestrian walks past an electronic stock board displaying the Nikkei 225 Stock Average and the Shanghai Stock Exchange Composite Index in Tokyo, Japan. Picture: BLOOMBERG/TOMOHIRO OHSUMI

Tokyo — Japan’s Nikkei rose more than 1% to a nearly two-year high on Tuesday, encouraged by a rebound in US hi-tech shares as investors bet on solid growth in the economy and corporate profits globally.

MSCI’s broadest index of Asia-Pacific shares outside Japan held firm near a two-year high struck last week, but was little changed on the day, with gains in hi-tech stocks offset by a decline in Australian shares.

A big focus for Asia is whether index provider MSCI will later in the global day open up its emerging markets index to Chinese mainland shares, which have restricted access for foreign investors.

Many investors expect the so-called A shares that make up the majority of China’s stock market to be included after being rejected on three previous occasions.

The blue-chip CSI300 index of mainland stocks was down 0.2%.

Wall Street’s S&P 500 and the Dow Jones industrial average hit record highs as technology shares bounced back after some sudden falls earlier this month.

"Hi-tech shares just went through a correction," said Mutsumi Kagawa, chief global strategist at Rakuten Securities.

"Their valuation is not that expensive, standing far below their levels at the peak of the dot-com bubble in 2000. Given that their profits are expected to see exponential growth in coming years, it is premature to say the rally in hi-tech shares is over."

US financial shares also gained as US debt yields rose after New York Federal Reserve president William Dudley, a close ally of Fed chairwoman Janet Yellen, said US inflation should rebound alongside wages as the labour market continues to improve.

The 10-year US Treasuries yield edged up to 2.184% from a seven-month low of 2.103% touched on Wednesday, following surprisingly weak US inflation data.

"Even though the Federal Reserve is about to shrink its balance sheet, possibly as soon as in September, US bond yields are kept at low levels, which are very comfortable for stocks," said Norihiro Fujito, senior investment analyst at Mitsubishi UFJ Morgan Stanley Securities.

"Trade volume is light and whether the market continues to rise depends on whether large-cap tech shares continue to rebound," he said.

The rebound in US bond yields helped to lift the dollar, which rose to ¥111.775, its highest level in more than three weeks.

The euro traded at $1.1148, just above its two-week low of $1.11315 set on Thursday.

The pound slipped slightly to $1.2732 from Monday’s high of $1.2814, held back by uncertainty over domestic politics and over Britain’s economic future, as formal Brexit negotiations got under way on Monday.

Oil prices flirted with this year’s lows as market players saw more signs that rising crude production in the US, Libya and Nigeria undercut efforts led by the Opec cartel to support the market with output curbs.

Brent crude futures traded at $47.02 a barrel, up 0.2% on the day but not far from last week’s low of $46.70 and the five-month low of $46.64 touched in early May.

US crude futures stood at $44.26 a barrel, about 0.5c above its five-month low of $43.76 set on May 5.

Safe-haven gold hit a one-month low of $1,243.2 an ounce as risk sentiment improved, before bouncing back a tad to $1,245.5.

Reuters

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