On Wednesday, Japan's Nikkei 225 surged over 2%, reaching a historic milestone above 51,000 for the first time. This remarkable increase in the Nikkei 225 index was driven by renewed optimism surrounding U.S.-Japan trade ties and growing expectations of another interest rate cut by the Federal Reserve.
The upward momentum in the Nikkei 225 followed a significant event on Tuesday, where U.S. President Donald Trump and Japan's Prime Minister Sanae Takaichi signed a new rare earths framework. This agreement is expected to enhance trade relations between the two countries, fostering a more favorable environment for economic collaboration.
Market participants are increasingly confident that the Federal Open Market Committee will announce a second consecutive 25 basis point cut to interest rates, aimed at supporting the slowing U.S. economic growth. Following the rate cut in September, this potential move would lower the federal funds rate to a range between 3.75% and 4.00%. Veteran investor Louis Navellier noted that if Fed Chair Jerome Powell adopts a dovish stance, it could lead to rising expectations for future cuts, further energizing market momentum.
While the Nikkei 225 flourished, the broader Topix index experienced a slight decline of 0.15%. In neighboring markets, South Korea's Kospi climbed 1.77%, although the small-cap Kosdaq lost 0.28%. In India, the Nifty 50 index gained 0.44%, while Australia's S&P/ASX 200 fell by 0.96%. Notably, Australia's consumer prices increased by 3.2% in the third quarter, marking the strongest gain in over a year, according to the Australian Bureau of Statistics.
Overnight in the United States, all three major stock indices closed higher. The S&P 500 rose by 0.23%, settling at 6,890.89 after briefly surpassing the 6,900 mark for the first time during intraday trading. The Nasdaq Composite gained 0.80%, closing at 23,827.49, while the Dow Jones Industrial Average increased by 161.78 points, or 0.34%, to finish at 47,706.37. These positive performances led to new all-time intraday highs for the Nasdaq and the Dow, alongside the overall market gains of the S&P 500.
Overall, the significant rise in Japan's Nikkei 225 reflects a broader trend of market optimism fueled by favorable trade agreements and anticipated monetary policy adjustments from the Federal Reserve. Investors will be closely monitoring these developments as they unfold.
