Nikkei 225 Recoups Losses Amid Global Rally and Weak Domestic PMI

The Nikkei 225 index saw a modest recovery on Thursday, climbing above the 26,500 level as markets attempted to shake off recent volatility driven by the escalation of the Russia-Ukraine conflict. The rebound followed a strong session on Wall Street, where the Dow, Nasdaq, and S&P 500 all posted significant gains, providing a positive catalyst for Asian markets. However, domestic headwinds persist as the Japanese government extends quasi-emergency COVID-19 measures across 14 prefectures, including Tokyo, Osaka, and Aichi, through March 21. Currently, 31 of the country's 47 prefectures remain under some form of emergency status, though infection rates are reportedly declining from previous record highs. Macroeconomic indicators provided a sobering backdrop to the equity gains. The latest survey from Jibun Bank revealed that the services sector continued to contract in February at an accelerated rate, with the services PMI score falling to 44.2 from 47.6 in January. The composite index similarly declined to 45.8, moving further below the 50-point threshold that separates expansion from contraction. Sector performance was led by financials, with Mizuho Financial, Mitsubishi UFJ Financial, and Sumitomo Mitsui Financial all advancing more than 3%. Major exporters also saw strength, with Toyota and Honda gaining over 1%, and Mazda Motor surging nearly 6%. In the commodities space, WTI crude futures settled at $110.60, the highest level since May 2011, while the U.S. dollar traded in the higher 115 yen range.