With the U.S. midterm elections and major corporate earnings reports due this week, the Nikkei 225 is expected to continue searching for direction. Market attention will focus on caution surrounding AI-related stocks and the course of earnings announcements.
The Nikkei 225 rose last week for the first time in 3 weeks on a weekly basis, but pared its gains toward the weekend as investors reacted negatively to U.S. hyperscaler earnings and adopted a more cautious view of AI investment. It closed ¥597 above the previous Friday at ¥63,290, with its 5-day trading pattern showing signs of a rebound from a bottom. The index also rose to ¥64,831 on the 29th before closing on the 30th near the previous Friday's level. This week is expected to bring the U.S. midterm elections, U.S. employment data, and earnings reports from major Japanese and U.S. companies, creating numerous factors that could determine the market's direction.
Movements in AI- and semiconductor-related stocks again heightened market caution. U.S. corporate earnings, including Alphabet's widening free-cash-flow deficit and Intel's weak revenue outlook, fell short of market expectations and cast a localized shadow over the market. At the same time, earnings from AI-related IPO companies and major semiconductor companies were treated as market catalysts, leaving the outlook for the flow of funds unsettled.
The results of the midterm elections are likely to affect market sentiment and will be a key focus this week. Voting and counting are scheduled for the 3rd, while concerns have also been raised that future geopolitical risks could spill over into oil prices and interest rates. Corporate earnings announcements will continue in Japan and overseas, while the U.S. employment report for October and ISM indices are also scheduled, putting the market's elevated valuation levels to the test. Earnings reports from major Japanese and U.S. companies are also likely to affect the market.
From a chart perspective, the Nikkei 225 showed a rebound with the 200-day moving average providing support. Movements around the ¥65,000 level and the low on 29 July suggest limited upside. The Nikkei futures overnight-session close was ¥62,420, pointing to a possible search for a lower level ahead. TOPIX may be entering a long-term correction, with attention focused on a catch-up toward the 100-week moving average and adjustment of the divergence.