The October focus will be on developments in the Middle East, oil prices and inflation, as well as earnings at Japanese companies and the outlook for US AI and semiconductor-related stocks. The decision by Japan and the US to hold off on raising interest rates is expected to affect Japanese stocks, while uncertainty surrounding the US midterm elections is likely to cast a shadow.
This report reviews the events that warrant attention when assessing Japanese stocks in October. First, regarding developments in the Middle East and oil prices, the positions of the US and Iran over the Strait of Hormuz remain far apart, making the path to an end to the conflict difficult to see. Meanwhile, oil supply has recovered to pre-conflict levels, and the outlook indicates that a sharp spike in prices will be avoided.
Next are inflation trends. US CPI for September and Japan's consumer price index (CPI) are scheduled to be released on 14 October and 23 October, respectively. Along with oil price trends, the data is expected to prompt the monetary authorities in Japan and the US to make interest-rate decisions cautiously. We expect both countries to hold off on rate hikes in October and believe this will limit volatility in Japanese stocks.
The focus of earnings will shift to the sustainability of strong performance by Japanese companies and performance trends in the cloud businesses of US AI and semiconductor-related companies. In Japan, interim earnings for the fiscal year ending March will get into full swing from late October, with results from Shin-Etsu Chemical, Advantest and Tokyo Electron, among others, due to be announced. For US companies, cloud investment and semiconductor demand will be key market focus areas during the earnings season.
Finally, the US midterm elections to be held on 3 November are expected to remain a source of uncertainty. Depending on the composition of the Senate and the battle for a majority in the House of Representatives, fiscal spending could change, and market participants believe this could weigh on stock-price upside in October.