Japanese stocks rose, and the Nikkei exceeded the level of 70,000 points, supported by Wall Street and a decline in oil

Japanese stocks rose on Tuesday, with the Nikkei index exceeding the level of 70,000 points, benefiting from Wall Street’s gains and the decline in oil prices, while strong demand at an auction for 10-year government bonds contributed to allaying fears that yields would continue to rise. However, the debt market remained under pressure from concerns about government spending plans and rising borrowing costs.

The Nikkei ended the session up 1.1 percent at 70,683.98 points, while the broader Topix index rose 0.9 percent to 4,183.56 points. The rise was characterized by a wide range of gains, as 165 stocks rose out of the 225 components of Nikkei, compared to a decline of 55 stocks, and five remained stable.

Stock gains accelerated during afternoon trading after the 10-year government bond auction attracted the strongest demand since May, alleviating fears of debt market turmoil and helping yields fall from their highest levels during the session.

Masahiro Ichikawa, a strategist at Sumitomo Mitsui DS Asset Management, said that the auction results were “very good” and confirmed the presence of strong demand from investors, which provided some reassurance that returns would not continue to rise continuously, threatening the performance of the stock market.

Japanese bonds were subjected to strong pressure during October, with increasing concerns about Prime Minister Sanae Takaichi's expansionary fiscal policy, coinciding with a wave of selling in global debt markets, especially French bonds.

On Monday, Takaichi pledged to “control” bond issuances and move quickly if the markets witnessed unexpected disturbances, in an attempt to reassure investors about the sustainability of public finances.

In the debt market, the 10-year Japanese bond yield rose 1.5 basis points to 3.1 percent, after paring its gains following the auction results. The twenty-year yield also declined from its peak during the session to reach 3.98 percent, after touching 3.99 percent, which is the highest level in three decades.

As for the 30-year bond yield, it recorded at the beginning of trading a new record level at 4.24 percent, before reaching 4.235 percent, rising by 0.5 basis points. The five-year bond yield rose 2.5 basis points to 2.385 percent, while the two-year bond yield rose two basis points to 1.925 percent.

The stock market also benefited from the positive performance of US stocks, after the three main Wall Street indices closed higher, and the Nasdaq index recorded a record level supported by the rise of major technology companies, including NVIDIA.

But Japanese technology stocks delivered a mixed performance. The shares of chip testing equipment company “Advantest” jumped 3.9 percent, and the shares of cable company “Fujikura” rose 5.2 percent, to be among the biggest gainers on “Nikkei.” On the other hand, the shares of SoftBank Group, which has significant exposure to artificial intelligence investments, fell 3.1 percent, recording the worst performance among the components of the index.

Wataru Akiyama, a strategist at Nomura Securities, said that investors have become more selective in evaluating stocks, as it is determined whether companies are overvalued or undervalued according to their current price levels.

The decline in oil prices had a clear positive impact on the Japanese market. Japan relies heavily on energy imports, especially from the Middle East, which makes the rise in crude prices a factor putting pressure on the costs of companies, households, the trade balance, and inflation.

At the same time, developments in global bond markets remain a risk factor. French borrowing costs rose amid selling linked to fears of the government's plans to reduce the deficit and contain high debt.

Investors' eyes are now turning to the statements of Bank of Japan Governor Kazuo Ueda, searching for signals about the pace of future increases in interest rates. Between the decline in oil and the strength of stocks on the one hand, and the rise in returns and financial fears on the other hand, monetary and fiscal policies remain the factors that most influence the direction of Japanese markets during the coming period.