Nikkei tests 4-month high, U.S.-N.Korea summit fuels optimism

  • Reuters
  • Stock Market News
Nikkei tests 4-month high, U.S.-N.Korea summit fuels optimism

By Ayai Tomisawa

TOKYO, June 12 (Reuters) - Japan's Nikkei share average rose on Tuesday morning, buoyed by optimism the U.S.-North Korea summit taking place in Singapore could pave the way for denuclearisation of the Korean peninsula.

The Nikkei rose 0.5 percent to 22,906.14 in midmorning trade, after dipping in negative territory briefly. The Nikkei was just a hair under its four-month high. If it rises above 23,050.39 hit on May 21, it will be the highest since Feb. 2.

Investors were closely focused on the summit under way between U.S. President Donald Trump and North Korean leader Kim Jong Un, as both sides seek to bridge differences and avoid nuclear confrontation on the Korean peninsula. said short-term money, such as event-driven funds, and commodity trading advisers were seen chasing the market higher, hoping that the two countries would find common ground on denuclearisation.

"Investors have priced in the possibility that the U.S. and North Korea would find some common ground," said Shogo Maekawa, global market strategist at JPMorgan (NYSE: JPM ) Asset Management.

"They don't expect that everything will be resolved at this summit but as long as investors confirm that two countries have found some common ground and will continue to have dialogue, the market will take this big event in stride."

Aside from the summit, he said the world's monetary policy takes centre stage as several major central banks meet this week.

The U.S. Federal Reserve is almost certain to raise rates again on Wednesday, inching closer to a neutral policy stance, while the European Central Bank is likely to signal on Thursday that it will start to roll back its 2.55 trillion euro bond purchase scheme this year.

The Bank of Japan also concludes a two-day meeting on Friday at which it is widely expected to keep its loose monetary policy intact.

Defensive stocks staged a rally, with railway stocks .IRAIL.T , drugmakers .IPHAM.T and food processors .IFOOD.T outperforming, rising 2.0 percent. 1.4 percent and 1.3 percent, respectively.

East Japan Railway 9020.T jumped 2.7 percent, West Japan Railway 9021.T surged 2.5 percent, Takeda Pharmaceutical 4502.T soared 3.0 percent and Ajinomoto 2802.T rose 1.2 percent.

Some large-cap tech shares lost ground, with Tokyo Electron 8035.T falling 0.9 percent, Shin-Etsu Chemical 4063.T declining 1.4 percent and Advantest Corp 6857.T shedding 1.2 percent.

The broader Topix .TOPX advanced 0.5 percent to 1,794.95. (Editing by Jacqueline Wong)

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