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Nikkei hits 30-year high as financials gain on Democrat control of Senate

(updates with reaction to COVID-19 state of emergency)

TOKYO, Jan 7 (Reuters) - Japanese shares ended higher on Thursday, with the Nikkei touching a 30-year peak, powered by financials as U.S. bond yields climbed on hopes of larger stimulus following Democrat victories in two Senate runoffs in Georgia.

The Nikkei average closed up 1.60% at 27,490.13, hitting its highest level since August 1990 at one point during the session and snapping a four-day losing streak.

The broader Topix added 1.68% to 1,826.30, climbing above a peak hit late last year to reach its highest level since October 2018.

Investor appetite was not dented by the chaos in Washington D.C. after supporters of President Donald Trump stormed Capitol Hill, forcing Congress to suspend a session to certify President-elect Joe Biden’s victory.

“That seemed like the ultimate epitome of four years of Trump’s presidency. But no one thinks the election results will be overthrown by this,” said Takashi Hiroki, chief strategist at Monex.

A sharp rise in U.S. bond yields boosted shares of Japanese banks and insurers, big investors in U.S. debt.

Insurer Dai-ichi Life Holdings rose 7.4%. Among banks, SMFG gained 5.5%, while Mizuho added 3.3% and Mitsubishi UFJ rose 3.5%.

Other cyclical, value shares also gained on hopes of a stimulus package from the incoming Biden U.S. administration.

Steelmakers gained 5.2%, with Nippon Steel rising 7.8%. Ship builder Hitachi Zosen surged 13.7%.

The Democrat victory in the Senate fanned renewed appetite in renewable energy stock, with Renova jumping 10.6% to a record high.

The Japanese government looked set to impose a one-month state of emergency in Tokyo and three neighbouring prefectures to curb a spike in COVID-19 cases.

The market took the move in its stride as the plan has been reported over the past few days but some railway operators suffered, with East Japan Railway falling 0.8%.

SoftBank Group dropped 1.6% after the news that the Trump administration is considering adding Alibaba Group Holding Ltd to its trade blacklist of Chinese companies.

Softbank Group is the largest shareholder of the Chinese e-commerce giant. (Reporting by Hideyuki Sano; Editing by Ramakrishnan M. and Shailesh Kuber)

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