Nikkei Falls 4.6% as China Stocks Rally on Stimulus

Japan’s Nikkei dropped 4.6%, with concerns over potential policy tightening under new Prime Minister Shigeru Ishiba weighing on sentiment. Meanwhile, Chinese stocks surged by 5%, boosted by fresh stimulus measures including lower mortgage rates and relaxed home purchase restrictions in major cities like Guangzhou, Shanghai, and Shenzhen. The dollar steadied against the yen following Ishiba’s comments over the weekend, while global markets await key data and speeches from central banks.

Equities

The FTSE 100 rose by 0.4% on Friday, supported by easing US inflation data and aggressive stimulus measures from China. The domestically-focused FTSE 250 gained over 1%, as hopes of a turnaround in the Chinese economy lifted sectors such as mining and luxury goods. Burberry led the charge, climbing 17% over the week, marking its best performance since March 2009. Mining stocks also benefited from China’s fiscal stimulus, with Cranswick shares jumping 6.7% after the meat producer raised its annual profit forecast towards the upper end of market expectations.

In the US, the Dow Jones Industrial Average closed at a record high, up 0.33% to 42,313.00, buoyed by cooling inflation and the prospect of further Federal Reserve rate cuts. The Russell 2000, which tracks small-cap stocks, rose 0.67%, benefiting from the lower-rate environment. However, the technology-heavy Nasdaq slipped by 0.39%, weighed down by a 2.17% decline in Nvidia's shares. Meanwhile, the S&P 500 edged slightly lower, down 0.13%, closing at 5,738.17.

Bristol-Myers Squibb shares increased by 1.58% following the FDA's approval of its new schizophrenia drug, providing a boost to the healthcare sector. Conversely, Costco Wholesale shares fell by 1.76% after the company reported lower-than-expected fourth-quarter revenues. Chinese companies listed in the US saw gains, with Alibaba shares rising 2.15%, while PDD Holdings and NetEase gained 4.67% and 2.65% respectively, following China’s decision to lower interest rates and inject liquidity into its banking system.

Miners also saw positive momentum, with Arcadium gaining 2.13% and US-listed BHP shares rising by 1.81%. Across US exchanges, advancing stocks outnumbered decliners by a ratio of 1.82 to 1, and the S&P 500 recorded 42 new 52-week highs with no new lows. Trading volume on US exchanges totalled 11.50 billion shares, slightly below the 11.87 billion average over the last 20 trading days.

Forex & Commodities

The yen surged on Friday but steadied as Japan’s incoming prime minister, Shigeru Ishiba, indicated monetary policy would remain accommodative. It hit a one-week high of 141.75 against the dollar, but expectations of a snap election and his comments have tempered the currency's sharp rise. The dollar remains under pressure, stabilising at 142.64 yen, while the euro is steady at $1.1167, and sterling trades at $1.3391.

Gold prices, down 0.2% to $2,653.38 per ounce, remain near their recent highs, driven by the Federal Reserve's rate cut and expectations of more easing. Oil prices rose for a second session amid escalating tensions in the Middle East. Brent crude gained 1.56% to $73.10 a barrel, while West Texas Intermediate crude climbed 1.36% to $69.11 per barrel, supported by fears of supply disruptions linked to the conflict involving Israel, Hezbollah, and Houthi militias.