Nikkei scores first record high since 1989 in global bull run

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[February 22, 2024]  By Marc Jones

LONDON (Reuters) - Stock market bulls were on the charge on Thursday as a blockbuster forecast from global chip favorite Nvidia set off a wave of record highs on global indexes, including the first for Japan’s Nikkei since 1989.

Tech-loving Tokyo had raced up over 2.2% to top its previous all-time closing and intraday highs set at the peak of the so-called bubble economy.

Europe did not take long to set its own records, with the regional STOXX 600, Frankfurt and Paris all joining in thanks to 0.7% to 1% gains. [.EU]

London's FTSE was a notable laggard due to its lack of tech firepower although Chinese equities had overcame an early wobble overnight to extend a winning run to an eighth straight session amid optimism over Beijing's stimulus efforts.

Long-term U.S. bond yields were nudging lower and the dollar drooped after Wednesday's minutes from the last Federal Open Market Committee meeting bolstered the view that interest rate cuts will now be slower than previously expected in coming.

"It has taken the Nikkei roughly 34 years to get to this record high but it is all being driven by strong earnings upgrades" said Absolute Strategy's global equities analyst Nick Nelson.

He said there was a big difference to the last time the Nikkei peaked during its bubble. Back then Japanese firm's trailing price-to-earnings were averaging at about 60 times. Now the metric is a more sensible 16 times.

"Nvidia also came overnight and U.S. Q4 reporting season has been pretty strong overall. Basically companies have delivered," Nelson added.

MSCI's broadest index of world shares wasn't quite able to score its own record but it wasn't far off, and U.S. futures were signaling solid gains for Wall Street later following Nvidia' stellar results.

It firm, which has been the most magnificent of the so-called Magnificent 7 set of global tech stocks, had forecast a roughly 233% surge in quarterly revenue, sending its shares up some 10% after-hours.

"U.S. futures are up, strong - that's just Nvidia, right there," said Kyle Rodda, senior markets analyst at Capital.com.

"Equities more broadly are following in the slip stream."

BIG IN JAPAN

The Nikkei has jumped nearly 17% already this year, with the S&P 500 and Nasdaq rallying some 5% each, driven in large part by mammoth expectations for artificial intelligence (AI), with Nvidia's chips at the centre of that boom.

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People using their smartphones take photos of electronic screens displaying Japan's Nikkei share average surged past an all-time record high scaled in December 1989, outside a brokerage in Tokyo, Japan February 22, 2024. REUTERS/Issei Kato

Thursday record setting charge included Tokyo Electron jumping 6%, chip-testing equipment maker Advantest surged 7.5% and another chip-related share, Screen Holdings rallied more than 10%.

Back in the bond markets it was all much more sedate.

Euro zone yields drifted to multi-month highs as money markets scaled back their bets on European Central Bank rate cuts to less than 100 bps this year after Federal Reserve minutes showed its policymakers were concerned about moving too early.

The 10-year U.S. Treasury yield eased slightly in both European and Asian time to 4.30%, but remained close to the 4.332% level marked a week ago, which had not been seen since the end of November.

While the bulk of Fed policymakers were concerned about the risks of cutting too soon there was still broad uncertainty about how long borrowing costs should remain at their current lofty level.

That reinforced the view among traders that any rate cut is not imminent, with market pricing suggesting one-in-three odds for a first reduction in May, according to CME Group's FedWatch Tool.

The dollar continued to retreat from a three-month high reached last week, when the U.S. dollar index, which tracks the currency against six major peers, reached 104.97. It was down 0.3% at 103.86 with the euro up 0.3% at $1.0851, sterling at $1.2647 and the yen broadly flat at 150.15 per dollar.

Elsewhere, oil prices rose, adding to gains from the previous session that came amid signs of tighter supply. [O/R]

U.S. West Texas Intermediate crude futures (WTI) gained 25 cents to $78.16 a barrel, while Brent added 47 cents to $83.47 a barrel and gold was on a 7-day winning streak at $2,030 an ounce.

(Reporting by Marc Jones; Editing by Angus MacSwan)

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