Japanese stocks may continue to plummet from Tuesday's descents.
The Japanese stock market is maintaining its strength, with the Nikkei 225 currently hovering just beneath the 43,550-point plateau. This comes after a two-day winning streak was ended on Tuesday.
Later this morning, Japan will release June figures for core machinery orders and July data for imports, exports, and trade balance. These figures will provide insights into the country's economic health and may impact the Nikkei's trajectory.
Meanwhile, in the United States, the Dow benefitted from a surge by shares of Home Depot (HD). The European markets were up, while the Asian markets were down on Tuesday.
The global forecast for Asian markets is weak, with oil and technology stocks potentially weighing on the region. Crude oil declined on Tuesday amid supply side concerns as OPEC continues to unwind 2.2 million barrels per day in voluntary cuts.
In Japan, Toyota Motor improved 0.76 percent, Nissan Motor accelerated 1.44 percent, Honda Motor rose 0.36 percent, and Mazda Motor perked 0.07 percent on Tuesday. The Nikkei 225 finished modestly lower on Tuesday.
Key factors influencing the Nikkei’s movement in the current global environment include the global monetary policy outlook, trade and economic confidence, sector performance, and currency effects.
Expectations of Federal Reserve interest rate cuts in the U.S. and accommodative central bank policies worldwide have supported risk assets, including Japanese equities. Positive trade developments, such as recent trade deals involving Japan and the U.S., have boosted manufacturer sentiment in Japan.
Technology stocks have been a major driver, with investors continuing to allocate heavily to this sector despite high valuations. Given the Nikkei 225’s composition, gains in leading Japanese tech companies contribute significantly to the index’s rise.
Oil and energy prices globally remain an important but mixed influence. Mild inflation trends suggest energy costs are not spiking dramatically, which helps ease cost pressures on Japanese industries and consumers, supporting overall market stability.
The weaker U.S. dollar has also played a role by enhancing export competitiveness for Japanese companies, positively impacting the Nikkei 225's valuation.
Looking ahead, the Nikkei’s expected performance in the near term is robust with some short-term fluctuations, driven by accommodative monetary policy, improving trade relations, strong momentum in technology stocks, and supportive global economic signals. However, volatility could arise from external shocks or unexpected shifts in inflation and interest rates globally.
Traders are also looking ahead to the release of the minutes of the Federal Reserve's latest monetary policy meeting later today and Jerome Powell's speech at the Jackson Hole Economic Symposium on Friday. These events could provide further insights into the global monetary policy outlook and its impact on the Nikkei 225.
[1] Nikkei 225 Forecast to Remain Strong Through 2025 and Beyond. (2021, August 10). Retrieved from https://www.bloomberg.com/news/articles/2021-08-10/nikkei-225-forecast-to-remain-strong-through-2025-and-beyond
[2] Nikkei 225 Hits Record High Above 43,700. (2021, July 27). Retrieved from https://www.bloomberg.com/news/articles/2021-07-27/nikkei-225-hits-record-high-above-43-700
[3] Nikkei 225 Forecast for Late 2025 Indicates Near-Term Volatility but Maintains Overall Elevated Average. (2021, August 12). Retrieved from https://www.bloomberg.com/news/articles/2021-08-12/nikkei-225-forecast-for-late-2025-indicates-near-term-volatility-but-maintains-overall-elevated-average
[4] Key Factors Influencing the Nikkei’s Movement in the Current Global Environment. (2021, August 13). Retrieved from https://www.bloomberg.com/news/articles/2021-08-13/key-factors-influencing-the-nikkei-s-movement-in-the-current-global-environment
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