The market became unstable following the US midterm election results, and the Nikkei 225 fell more than ¥4,000 at one point. The downside levels are estimated at ¥55,000 for the Nikkei 225 and around 3,500 for the TOPIX.
Against the backdrop of the Democratic Party's victory in the midterm elections held on 3 November (US time), US stocks fell across the board, and the Nikkei 225 faced the risk of a rapid decline. Concerns about capital outflows from the Japanese market also spread amid the turmoil in US markets.
US stocks fell across the board on 5 November, led by semiconductor and AI-related stocks. The VIX rose, and trading in ETFs linked to US stocks increased. This is expected to affect views on downside levels in the Japanese market. On 6 November, the Nikkei 225 fell below ¥57,000 at one point, while the TOPIX dropped below 3,700.
Near-term downside levels are estimated at around ¥55,000 for the Nikkei 225 and around 3,500 for the TOPIX. Thereafter, expectations for a recovery in corporate earnings and share buybacks are analyzed as potential support for the market. The analysis is based on a framework explaining medium- to long-term trends through movements in EPS and PER.