Nikkei Rises as Wall Street Boosts Sentiment, Despite Lingering Tech Caution

Nikkei rises: The Nikkei share average in Japan saw a rise on Tuesday, propelled by Wall Street's positive performance overnight. However, concerns surrounding tech earnings and tensions in the Middle East tempered the extent of the gains.

By the midday recess, the Nikkei had climbed by 0.27 per cent to reach 37,538.06. This marked the second consecutive session of gains for the index, following a recent slump to a 10-week low on Friday.

Trading during the day was marked by volatility, with the index experiencing a 1% increase before briefly dipping into negative territory, particularly affected by fluctuations in chip shares.

The broader Topix index also edged higher by 0.15 per cent during the morning session, with value shares outperforming growth shares, gaining 0.21 per cent compared to a 0.08 per cent rise in growth shares.

Wall Street's rebound on Monday, recovering from significant losses in the previous week, contributed to the positive sentiment. However, concerns lingered, especially regarding tech giants' earnings and developments in the Middle East.

Tesla shares, for instance, witnessed a 3.4 per cent decline following price cuts in several major markets. The electric vehicle manufacturer is part of the "Magnificent Seven" group of tech giants scheduled to report earnings this week, alongside Meta Platforms, Alphabet, and Microsoft.

Analysts pointed out the significant influence of overseas factors on Japan's stock market in recent trends. Shoki Omori, chief Japan desk strategist at Mizuho Securities, expressed anticipation of weaker-than-expected earnings, which could potentially push the Nikkei down to 37,000.

Just a month ago, the Nikkei had reached an all-time high of 41,087.75 before experiencing a sharp retreat to as low as 36,733.06 by Friday.

In the chip sector, notable names such as Tokyo Electron and Advantest saw modest gains, while Lasertec and Sumco faced declines.

With Reuters Inputs