Nikkei inches up on strong earnings, positive Wall Street momentum

The Nikkei share average in Japan staged a recovery on Friday, bolstered by upbeat earnings reports and gains on Wall Street overnight, though profit-taking activities curbed further advances.

Closing 0.41 per cent higher at 38,229.11, the Nikkei rebounded after initially surging over 1 per cent during early trading. Similarly, the broader Topix ended the day up by 0.54 per cent at 2728.21.

This week was marked by volatility for the benchmark index, which reached a three-week peak of 38,863.14 on Tuesday.

Investor sentiment received a boost this week amid renewed expectations for US interest rate cuts following softer-than-anticipated jobs growth in April.

The positive sentiment extended from Wall Street's performance, where optimism prevailed after weekly jobless claims data fuelled hopes for future rate cuts. This, coupled with encouraging local earnings, contributed to the Nikkei's gains.

However, as the index approached the psychologically-significant 39,000 level during morning trading, profit-taking activities limited further upward movement.

Closing the week almost flat, the Nikkei's performance follows two consecutive weeks of gains, indicating a period of consolidation in the market.

Market analyst Tony Sycamore of IG noted, "The direction of the trend for me is higher...But just in the next three to four months, I'd be a little bit more cautious," emphasizing factors such as the impact of a weak yen on the economy that need to be monitored.

Earlier this year, the index reached an all-time high of 41,087.75 before experiencing a retreat last month, marked by a 4.99 per cent decline, its largest monthly drop since December 2022.

Among individual stocks, earnings reports played a significant role in determining winners and losers for the day.

Gaming firms notably stood out, with Konami Group leading gains with a 9.3 per cent increase. Bandai Namco Holdings and Nintendo also advanced, up by 5.6 per cent and 3.3 per cent respectively.

Meanwhile, electrical equipment manufacturer Daikin Industries surged by 8.2 per cent.

On the downside, chip-related company Screen Holdings experienced a 12.2 per cent decline, while shares of Panasonic Holdings dropped by 4.7 per cent after the firm's energy unit missed its operating profit guidance for the business year.

(With Reuters inputs)