Stocks Seen Testing Downside, with Players Paying Close Attention to U.S., China

Jiji Press

9:58 JST, August 20, 2023

TOKYO (Jiji Press) — Tokyo stocks are largely expected to test their downside this week, with players paying close attention to external factors, such as the courses of the Chinese economy and U.S. monetary policy, market sources said.

Last week, the Nikkei average of 225 selected issues listed on the Tokyo Stock Exchange’s Prime section lost 1,022.89 points, or 3.15%, to end at 31,450.76 on Friday.

Early in the week, the market struggled for direction amid a lack of major trading incentives.

Selling, however, hit stocks hard on Wednesday amid a growing risk-averse mood reflecting worries about the Chinese economy and the health of the U.S. banking sector. The market remained bearish on Thursday and Friday partly because renewed fears that the U.S. Federal Reserve may raise interest rates further to tame inflation added to selling pressure.

This week, the Nikkei average is expected to move mainly between 30,800 and 31,800, analysts and brokers said.

“Carrying over this [last] week’s bearish mood, the Tokyo market might lose further ground next [this] week,” Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co., said, suggesting that the Nikkei could drop below 31,000.

Yutaka Miura, senior technical analyst at Mizuho Securities Co., agreed, saying that the Tokyo market is likely to remain weak early this week.

Still, he pointed to the possibility of U.S. chip giant Nvidia’s earnings announcement, scheduled for Aug. 23, pushing up stocks, especially artificial intelligence-related issues, if the report turns out to be rosy.

Throughout this week, investor attention will be on U.S. economic indicators such as S&P Global’s composite purchasing managers’ index for August, due out Aug. 23, and news related to the Chinese economy, market sources said.