Against the backdrop of US market developments, buying interest aimed at buying on dips is expected to influence market conditions. Easing concerns about additional Fed rate hikes and lower long-term interest rates are being viewed as positive catalysts, with market participants expected to assess the Nikkei average's recovery.
Japan's equity market on the 2nd is expected to focus on the strength of buying interest on dips while assessing the market's resilience after selling pressure subsides. In the previous session, the Dow and Nasdaq in the US both traded modestly higher, while lower long-term interest rates were viewed as a positive catalyst. Concerns about additional Fed rate hikes receded after the Fed vice chair indicated that it could take time to decide on the next action.
The Nikkei average has risen sharply recently, while Nikkei futures fell at one point from around ¥68,450 to ¥67,790 in overnight trading. At the same time, the August level of ¥69,608.24 is within reach, and buying on dips is strengthening amid caution. Funds flowed into semiconductor and AI-related stocks in the previous session, partly on Micron's earnings.
Trading could be subdued ahead of the release of the US employment report. However, while watching developments in stocks such as Advantest, Tokyo Electron and Kioxia Holdings, market participants may also focus on rebalancing into TOPIX-oriented stocks during profit-taking. Attention is warranted regarding signs of overheating in light of the reaction to the previous day's sharp rise and Bollinger Band levels.