Japan’s Nikkei 225 fell 0.7% to 37,805.35 in morning trade on Wednesday, with the broader Topix index down 0.6% to 2,655.29. This decline comes as the yen strengthened overnight, trading around 145.36 per dollar after touching a low of 147.34 the previous day. A stronger yen is often unfavourable for Japanese exporters, as it diminishes the value of their overseas earnings when converted back to yen. This pressure weighed heavily on the market, particularly for companies heavily reliant on exports.
The focus of investors has now shifted to upcoming U.S. employment data revisions. The benchmark revisions, covering the 12 months through March, are due for release later on Wednesday. Markets are particularly sensitive to labour-related data, and these revisions could spark renewed concerns about the U.S. labour market.
See: Nikkei sees a decline, trading at 37905.85 on the VT Markets app.
This scenario could reignite fears of a hard landing for the U.S. economy, similar to the market stress experienced earlier in August when a weak jobs report raised concerns about the risk of a recession.
The Federal Reserve’s stance on interest rates will be closely watched, especially with Chair Jerome Powell’s upcoming remarks at the Jackson Hole Economic Symposium on Friday. Market participants are looking for signals that could confirm or alter expectations of a potential rate cut in September.
Technology stocks were also under pressure, following the decline in their U.S. counterparts. Major chip-related shares in Japan saw declines, with Tokyo Electron dropping 1.5% and Advantest falling approximately 3%. The tech sector’s performance added to the overall downtrend in the Nikkei.
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On the other hand, Seven & I Holdings managed a rebound, rising 3.3% after a slump on Tuesday. Investors are still evaluating a takeover proposal from Canada’s Alimentation Couche-Tard, which could significantly impact the company’s future trajectory. However, not all shares fared well—cosmetics giant Shiseido saw a sharp decline, sliding about 5% and becoming the biggest percentage loser of the day.
As the week progresses, the market’s attention will likely remain focused on the U.S. labour market data and the Federal Reserve’s upcoming communications. While the yen’s strength may continue to weigh on Japanese stocks, any unexpected shifts in U.S. economic indicators could lead to heightened market volatility. Investors are advised to stay cautious and closely monitor these developments.
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