This week is expected to bring a search for buying opportunities against the backdrop of a solid U.S. economy. At the same time, interest-rate trends will be the market's focus, and the Nikkei 225 may experience periods of sharp swings.
The Nikkei 225 is expected to trade between ¥64,800 and ¥67,800, with movements in Japanese and U.S. technology stocks after the Silver Week holidays reportedly lifting the index back into the ¥66,000 range. Major U.S. indicators, including the September employment report, are scheduled for release this week, and a reaction to the recent advance as well as a market correction are anticipated. Over the medium term, the search for buying opportunities is expected to continue.
Caution toward technology stocks remains due to the impact of higher interest rates, but recent solid U.S. economic data are seen as supporting the momentum of the economic expansion, while expectations for improved corporate earnings are viewed as supporting share prices. The Japan-U.S. interest-rate differential remains wide, and if the yen remains weak, confidence in export-related stocks may also spread.
The key focus going forward will be a succession of U.S. releases, including the September employment report, August job openings, the September ADP employment report and the September PCE deflator, with interest in the Federal Reserve's actions also expected to increase. The Bank of Japan is also expected to continue considering an additional rate hike, but developments in expectations for the future course of monetary policy in Japan and the United States may at times keep the market on edge.