The Nikkei 225 jumped to a three-week high as Japanese markets reopened after a long holiday, helped by strong gains in the US market. However, after reaching its highest level since early September, the index pulled back slightly as some traders decided to sell. This cautious approach was influenced by concerns about US stock performance and the Federal Reserve’s decisions on interest rates.
The Nikkei surged to a three-week high after Japan’s extended holiday break, spurred by Wall Street’s strong performance. The index jumped 1.5% to 38,293.34 in early trading, briefly touching 38,338.65—its highest level since 3 September.
However, the Nikkei 225 closed at 38,026.15, slightly retreating from these highs. After reaching an intraday peak of 38,513, the index encountered selling pressure, pulling it down towards 38,026. The MACD on vtmarkets.com shows weakening momentum, with a shrinking histogram and a flat signal line, indicating potential consolidation or further decline.
Additionally, the 5, 10, and 30-period moving averages suggest a bearish trend, particularly after the price dropped below the 5-period average.
Market sentiment remained cautious due to concerns about US stock performance and the Federal Reserve’s rate decisions. The Nikkei 225’s closing at 38,026.15 reflects this cautious outlook. After hitting an intraday high of 38,513, selling pressure led to the downward move.
The MACD indicator shows declining momentum, with the signal line flattening, pointing towards possible consolidation or a further pullback. The 5, 10, and 30-period moving averages reinforce a downward trend, especially after the index fell below the 5-period average.
Investors are closely watching developments in the US, where gains have been modest, with lingering uncertainty around the long-term effects of the Federal Reserve’s recent rate cut. If the Nikkei breaks below the 37,921 support level, further bearish movement is likely, while resistance at 38,666 remains crucial for any recovery attempts.
Meanwhile, the Bank of Japan (BOJ) kept its interest rates unchanged last Friday, maintaining a cautious outlook. BOJ Governor Kazuo Ueda emphasised that the central bank would take its time in evaluating the global economic landscape before making any policy shifts. This dovish stance has reassured markets that the BOJ is not in a rush to tighten monetary policy.
Among the top-performing stocks were those related to the semiconductor sector. Advantest rose by 4%, and Tokyo Electron gained 2.7%, both benefiting from strong demand in the global chip market, which has been impacted by supply shortages.
The continued growth of this sector could indicate further strength if demand for semiconductors remains robust.
Other notable performers included Fast Retailing, the parent company of Uniqlo, which saw its stock rise by 1.25%. The company’s resilience is likely due to strong overseas sales, despite the recent volatility of the Yen.
Toyota Motor also advanced by 0.72%, providing the biggest boost to the TOPIX index, which climbed 1.02% to 2,669.34. Toyota’s effective management of supply chain issues has fuelled optimism about the company’s future earnings.
These trends are expected to continue in the short term, especially if Wall Street maintains its positive momentum and the BOJ remains patient with its monetary policy stance.
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