This week, the Tokyo stock market was weighed down by rising long-term interest rates in Japan and the U.S. and uncertainty over the Middle East, with the Nikkei Stock Average closing at 66,016.36, down 2,697.44 points (-3.9%) from the prior Friday. At the start of the week, Japanese long-term interest rates rose to levels not seen in roughly 30 years at one point, but buying in AI and semiconductor-related stocks provided support. Toward midweek, however, concerns over the Middle East resurfaced after President Trump said he was not seeking an extension of the memorandum with Iran. As expectations of an early additional rate hike by the Bank of Japan strengthened, long-term rates continued to climb, becoming a selling catalyst for tech stocks. The U.S. 30-year Treasury yield reaching a 19-year high and July retail sales coming in below market expectations were also viewed as negative factors, and on August 19 the TOPIX fell more than 3%.<\/p>\n
In the latter half of the week, the market showed signs of stabilizing. The U.S. Treasury Department’s announcement of an increase in the cap on bond purchases pushed long-term rates lower and lifted U.S. equities. South Korean semiconductor stocks also rose on expectations of large-scale share buybacks, and dip-buying gained the upper hand in the Tokyo market as well. On Friday, selling initially prevailed amid rising Japanese and U.S. long-term rates, but buying in AI and semiconductor-related names provided support, and the market closed off its lows.<\/p>\n
Jackson Hole Symposium: Focus on Chair Warsh’s Remarks<\/p>\n
The biggest event next week is the Jackson Hole symposium, held in Wyoming from August 27 to 29. In particular, the keynote address by Federal Reserve Chair Warsh scheduled for August 28 is drawing market attention. Inflation indicators have recently been coming in below expectations, and many economic data points point to a slowing economy, so near-term concerns about additional rate hikes have receded significantly. While the likelihood of negative catalysts appears small, Chair Warsh has maintained a reluctant stance toward forward guidance since taking office. If he makes remarks that clearly reaffirm this “no guidance” policy, there is room for the equity market to interpret it negatively.<\/p>\n
In the U.S. market, the focus is shifting away from whether rates will be hiked in the near term and toward the trajectory of long-term rates, which remain on an upward trend, and the deterioration in economic sentiment signaled by sharp downside surprises in employment and retail sales data. These factors are likely to continue capping upside in equities. Additionally, with the Strait of Hormuz closure prolonged and crude oil prices remaining elevated, European diesel prices have risen more than 70% from pre-war levels and U.S. gasoline prices are up 60%. Energy-driven inflationary pressure remains persistent, and the U.S. core PCE deflator due on August 28 is expected to exceed the Fed’s 2% target for the 65th consecutive month.<\/p>\n
Nvidia Earnings to Set Tone for AI and Semiconductor Stocks<\/p>\n
In the Japanese market, Nvidia’s earnings release scheduled for August 26 is the biggest point of interest. The stock’s post-earnings reaction is expected to have a major impact on Japanese AI and semiconductor-related names. Last time, the company reported results that beat market expectations, yet the stock fell immediately after the announcement. Major overseas semiconductor stocks have also generally tended to see selling pressure after strong earnings releases recently, so a similar pattern is likely this time as well. The current stock price level is roughly where it was at the time of the previous earnings release, making a “sell-the-news” reaction easy to trigger.<\/p>\n
Marvell Technology’s earnings are also due the following day, August 27. The stock has risen more than 50% from its recent low on July 29, and it is expected to be even more susceptible to a near-term “sell-the-news” reaction than Nvidia. Meanwhile, among software-related names that tend to move inversely to AI and semiconductor stocks, Salesforce \u2014 a leading SaaS company \u2014 is scheduled to report earnings on August 26. Investors are focused on capital expenditure trends at major cloud providers, and whether the pace of AI-related investment expansion is maintained will be a litmus test for whether stretched valuations can be supported.<\/p>\n
Domestic Factors and Economic Indicators<\/p>\n
Domestically, hopes for a short-term improvement in the Middle East situation have faded, and concerns about persistently high inflation remain. Given factors such as coordinated Japan-U.S. currency intervention, the Bank of Japan is considered highly likely to implement an additional rate hike in September. The impact on future corporate earnings does not appear to be fully priced in, and there is also room for further yen appreciation, so the negative impact on the equity market remains. The August Tokyo metropolitan area consumer price index (CPI) is scheduled for release on August 28 and will be an important indicator for gauging the BOJ’s policy decision.<\/p>\n
Next week’s Japanese economic indicators include July nationwide department store sales on August 25, the July corporate services price index on August 26, and July unemployment rate, job-to-applicant ratio, and the August Tokyo metropolitan area CPI on August 28. Overseas, Germany’s August Ifo business climate index and U.S. housing-related indicators are due on August 25, the revised U.S. April-June GDP and July durable goods orders on August 26, and the Chicago PMI on August 28.<\/p>\n
The Japanese equity market continues to face a lack of fresh catalysts, and trading is likely to center on stock selection in related names while watching overseas semiconductor stocks. There is also room for positioning to intensify around rising long-term rates and the prospect of additional rate hikes. Furthermore, as the Iran situation becomes increasingly chaotic, there is potential for further differentiation between stocks that benefit, such as shipping names, and sectors where investors remain cautious. Some analysts also point to the possibility of retail stocks being re-rated on expectations of a sales recovery reflecting the rise in temperatures since mid-August.<\/p>\n","protected":false},"excerpt":{"rendered":"This week, the Tokyo stock market was weighed down by rising long-term interest rates in Japan and the…\n","protected":false},"author":2,"featured_media":78377,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[1300,21455,41351,8,17,26182,7787,1879,2974,25545,50320],"class_list":["post-78376","post","type-post","status-publish","format-standard","has-post-thumbnail","category-japan","tag-bank-of-japan","tag-bank-of-korea","tag-fed-chair-warsh","tag-japan","tag-japanese","tag-marvell-technology","tag-nikkei-stock-average","tag-nvidia","tag-president-trump","tag-salesforce","tag-tokyo-metropolitan-area-consumer-price-index"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/posts\/78376","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/comments?post=78376"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/posts\/78376\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/media\/78377"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/media?parent=78376"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/categories?post=78376"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/tags?post=78376"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}