Nikkei 225 Falters Amid Subdued Capex Trends
2024-06-05
Summary:
Nikkei 225 fell on Wednesday amid an ongoing poor performance. Speculation rises on the BOJ considering the interest rate hike to bolster the yen.
Japan's Nikkei 225 fell on Wednesday, continuing its dismal performance since last summer. Growing speculation suggests the Bank of Japan may raise interest rates in the coming months to support the yen.
Japanese companies trimmed capital investment in the last quarter, a result that likely indicates revised data due next week will continue to show the economy contracted in the period.
Manufacturers led the decline, though service-sector firms boosted spending slightly. This came on the heels of a surge in spending at the end of 2023, as reported by the finance ministry.
Corporate earnings showed continued strength, jumping 15.1% from a year earlier, nearly double the consensus estimate, and marking the fifth consecutive quarter of gains. This helped push local stocks higher.
The cautious stance stands in contrast to the March decision by many large companies to offer workers the biggest wage increases in three decades this fiscal year.
Weak corporate investment bodes ill for both the economy and the central bank, as it indicates companies are concerned about anemic consumption and uncertainties in external demand.
The benchmark stock index was directionless recently. It may need to breach 50 SMA to bolster the bullish case while 38,000 looks like a favourable entry point.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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