Sep 28, 2023

Nikkei stocks have followed other global indices lower over the last two weeks over economic growth fears.

JPN225 Weekly Chart

JPN225: Weekly Chart

The Nikkei trades at 32,077 after a drop from resistance at 33,000 last week. Support lies at the 30,670 level.

Japan’s share average fell after declines in heavyweight chip-related stocks, but value stocks saw limited losses as investors looked for dividends.

“Growth shares weakened amid concern about rising US Treasury yields,” said Takehiko Masuzawa, head trader at Phillip Securities.

“While gains in value stocks supported the market as investors bought stocks with higher dividend payouts,” he said.

Investors need to buy dividend stocks before the next trading session in order to qualify for payouts from companies making their half-year cutoff.

US Treasury yields are at their highest level since 2007, and Jamie Dimon, CEO of JP Morgan, believes the economy is not ready for another jump.

“I am not sure if the world is prepared for 7%,” Dimon said.

“Going from 0% to 2% was almost no increase. Going from 0% to 5% caught some people off guard, but no one would have taken 5% out of the realm of possibility. I’m not sure if the world is prepared for 7%.”

That quote will have many investors worried after the March regional banking crisis in the US. Yields were much lower then and may cause more turmoil if inflation cannot be contained.

Oil prices are not helping, with a two-day surge bringing prices back above $93 per barrel. Crude oil prices moved higher today after the Energy Information Administration reported a crude oil inventory draw of 2.2 million barrels for the week to September 22.

Investors are also looking ahead to data from the Chinese economy in order to price the Nikkei, while fears over the country’s property sector have also weighed. Chinese property woes are weighing after developer Evergrande defaulted on its 4 billion yuan onshore bond repayment and delayed the restructuring meetings. Fears over a US government shutdown have also weighed, but the US stock indices rallied into the close of Wednesday and should boost Asian indices to the end of the week.

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