Nikkei recovers from six week low

The Nikkei has got the new week off to a good start today (March 24th) by recording a solid gain to recover from the six-week low reached by the index last week.

Friday had been a public holiday for the Japanese stock markets, but the index opened strongly this morning and ended the session 1.8 per cent up on the start of the day.

But the Nikkei is still down by more than ten per cent on the turn of the year, with the index losing some of the strong gains it picked up over the course of 2013. The Nikkei had comfortably outperformed global rivals such as the Dow Jones, the FTSE 100 and the S&P 500 last year.

Speaking to Reuters, Masatoshi Kikuchi, pan-Asian chief equity strategist at Mizuho Securities, stated that spring has not yet arrived for the Japanese index.

He said: "It'll be difficult for the Nikkei to rise to 16,000 by the fiscal year-end but I still expect the benchmark will reach 16,500 yen by the end of June, buoyed by the prime minister's growth strategy due in June and solid corporate earnings."

Fed comments

Markets around the world were spooked last week by comments made by the new head of the US Federal Reserve Janet Yellen, who took over the role from Ben Bernanke last year. Ms Yellen, who was US leader Barack Obama's preferred candidate for the position, said interest rates could be increased as soon as next year.

Stefan Worrall, director of equity cash sales at Credit Suisse in Tokyo, suggested that one of the reasons for the underperformance of the Nikkei in 2014 so far is investors are worried about the potential impact of an impending sales tax rise, which is due to come into effect from April 1st.

He said: "Market participants need to recalibrate, particularly when there is a such intense uncertainty over the direction of the Japanese market towards the end of fiscal year."

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