Nikkei falls as yen strength, investor uncertainty weigh on market
Date
8/26/2024 7:23:37 AM
(MENAFN) Japan's NIKKEI index experienced a decline on Monday, following two consecutive sessions of gains, primarily due to the impact of a stronger yen on exporters, including those in the chip and automotive sectors. The Nikkei fell by 0.66 percent, closing at 38,110.22 points, though it managed to recover from an earlier drop of up to 1.4 percent during the trading day. Market analyst Shotaro Yasuda from Tokai Tokyo Intelligence highlighted that the strong yen and investor caution—particularly in anticipation of Nvidia’s earnings outlook later in the week—were contributing factors. Nvidia's performance has notably influenced stock markets in 2024, and its forthcoming results could significantly impact market sentiment, especially during a traditionally volatile period of the year.
The yen reached a three-week high against the dollar, creating a stark contrast between the dovish stance of Federal Reserve Chairman Jerome Powell and the hawkish position of Bank of Japan Governor Kazuo Ueda. Ueda has indicated a readiness to raise interest rates if inflation remains on track to meet the 2 percent target, suggesting that recent market fluctuations will not deter the planned rate hikes. This divergence in monetary policy between the Fed and the Bank of Japan has added to the market's uncertainty, casting a shadow over stock performance. As a result, chip-heavy companies in Japan saw declines despite the U.S. semiconductor index rising by 2.79 percent on Friday. Notably, Tokyo Electron and Advantest fell by 2.51 percent and 2.43 percent, respectively.
The auto sector also suffered, falling by 2.87 percent and emerging as the worst performer among the 33 sector sub-indexes on the Tokyo Stock Exchange. The relationship between the yen and stock prices typically involves an inverse correlation, where a stronger yen reduces the competitiveness of exporters and makes stocks more expensive for foreign investors. Consequently, the broader Topix index also declined by 0.87 percent to 2,661.41, largely driven by a 3.15 percent drop in Toyota Motor Corp’s share price.
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