FX168 Financial News (Asia Pacific) News Japan's Nikkei Index rose more than 1% on Thursday (December 12), closing at its highest point in two months, benefiting from the strong performance of US stocks. The US inflation report released earlier, which was in line with expectations, raised the market's expectations that the Federal Reserve would cut interest rates next week.

By the close, the Nikkei Index had risen for the fourth consecutive trading day, up 1.21%, and closed at 39,849.14 points, the highest since October 15. On the same day, the index broke the 40,000 mark for the first time since October 15. The broader TSE Index rose 0.86% to 2,773.03 points. #日本市场 #

Of the more than 1,600 stocks traded on the main board of the Tokyo Stock Exchange, 64% of stocks rose, 32% fell, and another 3% remained flat.

In terms of individual stocks, chip testing equipment manufacturer Advantest surged 5%, which was the biggest driver of the Nikkei Index's rise. Uniqlo's parent company's rapid sales increased by 0.87%. Silicon wafer manufacturer Shin-Etsu Chemical fell 0.77%, which dragged down the Nikkei Index the most.

“The Nikkei Index failed to hold the 40,000 mark because investors chose to sell stocks to make a profit,” said Jun Morita, general manager of the research department at Chiba Bank Asset Management Company. “However, for the local stock market, the current environment is positive because even if the Federal Reserve cuts interest rates and the Bank of Japan raises interest rates, it seems that the yen will remain weak against the US dollar.”

The US S&P 500 index rose on Wednesday, while the strong performance of technology stocks helped the Nasdaq to break the 20,000 mark for the first time, thanks to the release of the inflation report.

According to a report released by the US Bureau of Labor Statistics on Wednesday, the November inflation index “Consumer Price Index” (CPI) rose 2.7% year on year, in line with expectations; it increased 0.3% month-on-month, the biggest increase in 7 months. Excluding volatile food and energy, core CPI rose 3.3% year over year and 0.3% month over month. These results are all in line with Dow Jones's expectations.

According to CME's FedWatch Index, this inflation report further strengthened the prospects for the Federal Reserve to cut interest rates, and traders raised the possibility of cutting interest rates to more than 96%. The possibility that interest rates will be cut in January next year has increased to 23%.

The Bank of Japan is inclined to keep interest rates unchanged at next week's meeting because policymakers want to spend more time analyzing overseas risks and clues about next year's wage prospects.

“Whether the Bank of Japan raises interest rates this month or next, the market is unlikely to experience large fluctuations like in August,” said Yugo Tsuboi, chief strategist at Daiwa Securities.

The swap rate shows that the probability of raising interest rates by 25 basis points next week is 25.3%, while the probability of a January rate hike is 69%.