Japan’s Nikkei Stumbles as Nvidia Earnings Results Loom (UPDATE 1)

Reuters

12:44 JST, May 22, 2024 (updated at 16:00 JST)

TOKYO (Reuters) – Japan’s Nikkei share average fell on Wednesday as investors awaited earnings from Nvidia, while domestic firms’ cautious outlooks amid uncertainties about rate and currency moves weighed on sentiment.

The Nikkei closed down 0.85% at 38,617.10, while the broader Topix was 0.81% lower at 2,737.36.

“The whole world is awaiting the result of Nvidia. The outcome will affect global stocks, particularly the U.S. equities, which will affect Japanese stocks,” said Shuji Hosoi, senior strategist at Daiwa Securities.

NvidiaNVDA.O, Wall Street’s third-largest firm by market capitalization, will report results after the closing bell on Wednesday in what is likely to be a significant market catalyst and will test whether the outsized rally in AI-related stocks can be sustained.

Heavyweight chip stocks, which helped the Nikkei scale a record intraday high of 41,087.75 on March 22, sagged ahead of the earnings.

Tokyo Electron declined 1.2% and Advantest, which counts Nvidia among its customers,fell 0.8%.

The Nikkei has been hovering below 40,000 since the beginning of April, partly because local companies’ modest earnings forecasts have weighed on sentiment, strategists said.

“Today’s declines were bigger than expected. Investors, particularly foreigners, might be selling Japanese stocks to buy overseas stocks whose outlook is stronger,” Hosoi said.

Markets are also bracing for further rate hikes by the Bank of Japan this year. Bond yields have risen this month on hawkish hints from the central bank as it seeks to contain the yen’s depreciation.

Of the Nikkei’s 225 constituents, 176 fell, with index heavyweight Fast Retailing being the biggest drag on the index with a 1.9% decline.

Among other stocks, Shin-Etsu Chemical, which manufactures chip silicon products among other things, stumbled 2.3%. Toyota Motor fell 1.4%.

On the other hand, SoftBank Group rose 2.4% to become the biggest support for the Nikkei.

Kusuri No Aoki Holdings rose 1.6% after Hong Kong-based activist fund Oasis Management raised its stake in the drug store chain.