Market Outlook, 3 September Edition: U.S. stocks: Can the Fed chair raise rates without fearing Trump's anger? Japanese stocks: The Nikkei 225 is "built on soft ground"

U.S. markets first saw stock prices fall at the end of August in response to military action against Iran and a sharp rise in crude oil prices. The Dow Jones Industrial Average fell $374 on 31 August, crude oil futures remained at elevated levels, and long-term interest rates rose to around 4.76%. Against this backdrop, remarks by the prospective Fed chair and concerns about inflation intensified, and expectations of a rate hike came into focus in the market.

On 1 September, reports of U.S. military airstrikes, a renewed rise in crude oil prices and accelerating increases in interest rates weighed on the market. The ISM index was at a level indicating economic expansion, but it attracted limited attention as a market driver, and investor caution remained elevated. Market concerns continued to center on Trump's actions and the possibility that tensions in the Middle East could be prolonged.

On 2 September, the Dow Jones Industrial Average rose more than $460 at one point before paring its gains. The performance of AI-related stocks locally influenced the market, and the Nasdaq rebounded. However, long-term interest rates remained on an upward trend, while the impact of higher crude oil prices also continued.

Meanwhile, Japanese markets were affected by higher U.S. long-term interest rates and crude oil prices. On 31 August and 1 September, the Nikkei 225 rebounded after plunging, but on 2 September the market fell broadly, with many stocks on the TSE Prime Market declining. The decline in AI and semiconductor stocks became a factor supporting the market.

The view that the Nikkei 225 is "built on soft ground" became widespread. While futures buying by overseas short-term investors provided support, concerns over higher crude oil prices and rising interest rates once again weighed on the market.