The Nikkei share average engaged in Nikkei profit taking on Thursday after briefly topping 60,000. Investors locked in gains from an early rally during the session. The outlook of the war in the Middle East remained unclear. Investors also assessed lingering geopolitical risks and weakening US stock futures. Oil prices rose after stalled peace talks between Iran and the United States.
The Nikkei ended 0.75 percent lower at 59,140.23. It had touched a record high of 60,013.98 earlier in the day. Early gains received support from news of President Trump extending the ceasefire with Iran. The broader Topix fell 0.76 percent to 3,716.38. Consequently, the Nikkei profit taking affected both major indices.
Trump made what appeared to be a unilateral announcement on Tuesday. He said the US would extend the ceasefire until discussing an Iranian proposal. Iran wants to end the two month old war through negotiations. However, Iranian officials did not say they had agreed to any extension. They criticized Trump’s decision to maintain the US Navy blockade. Iran considers the blockade itself an act of war.
Hiroyuki Ueno is chief strategist at Sumitomo Mitsui Trust Asset Management. He said uncertainties still surround the Middle East war. The Strait of Hormuz is not completely open yet. Oil prices remain high as a result of these tensions. Investors have bought shares on optimism for the war’s end. For the index to rise further, they need more positive cues. The Nikkei profit taking reflects this cautious outlook.
The Nikkei has recouped all losses since the US Iran war began in late February. Gains have come from a narrow group of AI related stocks. SoftBank Group and Advantest lead this concentrated rally. The NT ratio, or Nikkei divided by Topix, hovered at a record high of 15.91. This ratio underscores how the wider market has not kept up with the rally.
Masahiro Ichikawa is chief market strategist at Sumitomo Mitsui DS Asset Management. He said investors booked profits as they weighed declines in S&P 500 and Nasdaq futures. In Japan, chip related shares gave up their early gains. Advantest and Tokyo Electron both ended flat for the day. Technology investor SoftBank Group narrowed its gains significantly. It ended only 3.86 percent higher after a stronger early rise. Of the 1,600 shares on the Tokyo Stock Exchange prime market, 21 percent rose and 75 percent fell. Only 2 percent of shares closed flat. The Nikkei profit taking thus reflected broad based selling across most sectors. Future trading will likely depend on Middle East ceasefire developments.
