Tokyo Stocks Expected to Remain Weak due to Middle East Tension, U.S. Rates

Jiji Press

15:17 JST, October 28, 2023

TOKYO (Jiji Press) — Tokyo stocks are expected to move on a weak note next week due to persistent concerns including about the Middle East situation, market sources said Friday.

This week, the Nikkei 225 index lost 267.67 points, or 0.86%, to end at 30,991.69 on Friday.

The market was generally top-heavy throughout the week, pressured by the Israel-Hamas conflict and high U.S. interest rates, as well as dismal earnings reports from some U.S. technology giants.

Next week, when the market will be closed Nov. 3 for a national holiday, the Nikkei 225 is expected to move approximately between 29,500 and 31,500, analysts and brokers said.

With the Israel-Palestine tensions remaining high, investors are “unlikely to increase their equity holdings globally,” a bank-affiliated brokerage firm official said. Unless there is a clear change in the situation, such as major countries making big moves to ease the tensions, buying would not be able to gather steam, brokers said.

The supply-demand balance could also be another source of concern.

“We need to be aware of the possibility of the Nikkei slipping through 30,000 on selling to unwind arbitrage positions,” an official at a major securities house said, pointing out that about 25,000 put options have yet to be exercised.

Even if worries over geopolitical risks ease and corporate earnings turn out better than expected, stocks cannot top 32,000 due to selling the rally, analysts forecast.

The Bank of Japan and the U.S. Federal Reserve are scheduled to hold their respective policy meetings, and many U.S. economic indicators will be released.

Players, however, are likely to focus on fresh earnings reports from Japanese companies, a broker noted.