Key points:
The Nikkei climbed to a three-week high as trading resumed after a long holiday weekend in Japan. Boosted by Wall Street’s performance overnight, the Nikkei surged by 1.5%, reaching 38,293.34 in early trading.
Earlier in the session, it touched 38,338.65, its highest point since September 3.
Picture: Nikkei trading at 38033.85 on the VT Markets app.
The Nikkei 225 closed at 38,026.15, marking a slight pullback from its recent highs, following cautious market sentiment surrounding U.S. stock performance and the Federal Reserve’s rate decision. After reaching an intraday high of 38,513, the index saw selling pressure, as reflected by the decline towards 38,026.
The MACD indicator is showing signs of waning momentum, with the histogram declining and the signal line flattening, suggesting potential consolidation or further downside. The moving averages (5, 10, 30-period) indicate a downward trend, particularly after the price crossed below the 5-period moving average.
Market participants remain focused on the U.S. market developments, where modest gains were observed, though uncertainty lingers regarding the long-term impact of the Fed’s recent rate cut. Should the Nikkei break below the key support level of 37,921, we could see further bearish action, while resistance at 38,666 remains a key level for any recovery attempt.
Meanwhile, the Bank of Japan (BOJ) held its interest rates steady last Friday, giving a dovish outlook. BOJ Governor Kazuo Ueda reiterated that the central bank could take its time in assessing how the global economy plays out.
This cautious stance from the BOJ seems to have provided market participants with some reassurance, as it signals the central bank will not be rushing into any tightening of monetary policy.
Chip-related stocks were among the best performers, with Advantest gaining 4% and Tokyo Electron up 2.7%. Both companies are closely tied to the global semiconductor industry, which has been experiencing both supply constraints and demand surges this year. The sector’s rise could point to further strength if global chip demand continues to expand.
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Other key gainers included Fast Retailing, the parent company of Uniqlo, which increased by 1.25%. Fast Retailing has remained resilient, likely benefitting from its strong overseas sales, despite the Yen’s recent fluctuations.
Toyota Motor also climbed 0.72%, offering the biggest boost to the broader Topix index, which was up 1.02% at 2,669.34. Toyota has been actively managing its supply chain challenges, and its positive momentum suggests traders remain optimistic about the automaker’s future earnings.
We expect these trends to persist in the near term, especially if Wall Street maintains its upward trajectory and the BOJ continues to signal patience in its monetary approach.
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