Stock market outlook.
Expected range: upper limit of 40,000 yen - lower limit of 38,800 yen.
The U.S. stock market fell on June 28th. The Dow Jones average closed at 39,118.86, down 45.20 yen (-0.12%) from the previous day, the Nasdaq fell 126.08 points (-0.71%) to 17,732.60, and the S&P500 fell 22.39 points (-0.41%) to 5,460.48. The Nikkei 225 futures in the Osaka Exchange's night session closed at 39,820 yen, up 200 yen from the previous day's normal closing price.
In the Prime market trading value rankings for this weekend, Mitsubishi UFJ (8306) was the top performer, with active trading in financial stocks such as banks, insurance companies, and securities companies with large market capitalization due to the rise in long-term interest rates, while real estate stocks, which represent the rise in interest rates downside sectors, were strong, suggesting that trading under a 'Bank of Japan trade' in anticipation of the Bank of Japan's monetary policy decision meeting at the end of July did not take place. This week's Prime market saw a general trend of buying for the TOPIX core 30 stocks in a situation where the trading value did not increase much. The trend of a wide range of industries and stocks being bought during this time when the trading value did not increase much is similar to that seen in mid-January of this year. At the time of the January rise, foreign investors were the overwhelming buyers. While it is unclear what is driving this week's rise in financial stocks, if it were due to foreign investors who have been quiet so far entering the market, the Nikkei Average and TOPIX could also expect another upward trend.
The exchange rate progresses with yen depreciation and dollar appreciation up to the level of 161 yen per dollar, and Minister of Finance Kanda and Minister of Finance Suzuki have increased verbal intervention, but their effectiveness is limited. It has been suggested that the market's opinion is that in the current high speed of yen depreciation, implementing an exchange rate intervention is difficult by relying on verbal intervention alone.
Moreover, some believe that the US Treasury's addition of Japan to its list of currency-manipulating countries has made it harder for the government and the Bank of Japan to intervene in the market. Other factors that are contributing to speculation include the replacement of Kanda, who was in charge of currency intervention, and so on.
However, since no one outside of government and Bank of Japan officials knows the specific rules governing currency intervention, there is still a sense of caution. When currency intervention was last implemented in April-May, for instance, the USD/JPY fluctuated from around 160.10 yen on April 29 to around 151.90 yen on May 3, with an appreciation of over eight yen, providing good selling points to companies with high overseas sales ratios if and when currency intervention is implemented.
The schedule to watch next week:
Next week, the dollar/yen may struggle. Although Japan was added to the US Treasury Department's watchlist of currency manipulators in the currency report released by the department, there is still a possibility of currency intervention at a level exceeding 161 yen to the dollar. If the right-wing forces win in the French parliamentary elections to be held on June 30th, there is a possibility that the euro sell-off/yen buying, which is a risk-averse move, will have an impact on the short-term trend of the dollar/yen leading up to the decisive vote on July 7. It could be one factor that will suppress the dollar's rise, along with expectations that wage growth pressure is expected to weaken somewhat in the June U.S. employment statistics announced on July 5 amid the continued weakening of the yen and the possibility that the Bank of Japan will consider raising interest rates further at its monetary policy decision meeting in July.
Schedule to watch next week:
July 1st (Monday): Bank of Japan Tankan Survey (Large Enterprise Manufacturing DI) (June), Australian Retail Sales (May), China Caixin Manufacturing PMI (June), Germany Consumer Price Index (June), U.S. ISM Manufacturing Business Situation Index (June), ECB Forum in Europe, introductory remarks by President Lagarde (until the 3rd), etc.
July 2nd (Tuesday): Monetary Base (June), Eurozone Consumer Price Core Index (June), Eurozone Unemployment Rate (May), U.S. JOLTS Employment Opportunities Statistics (May), participation of Federal Reserve Board (FRB) Chairman Powell and ECB President Lagarde in a panel discussion at the ECB Forum in Europe, etc.
July 3rd (Wednesday): The final report on the 2024 spring labor offensive by the Union, Caixin Services Industry PMI (June), Caixin Composite PMI (June), Eurozone Producer Price Index (May), U.S. ADP National Employment Report (June), U.S. Initial Jobless Claims (last week), U.S. Trade Balance (May), U.S. ISM Non-Manufacturing Business Situation Index (June), minutes of the Federal Open Market Committee (FOMC) meeting on June 11-12, and participation of the New York Fed president in a panel discussion at the ECB Forum in Europe, etc.
July 4th (Thursday): Australian Balance of Trade (May), U.S. Stock Market Closed for Holiday (Independence Day), UK General Election, ECB Minutes (June Meeting), etc.
July 5th (Friday): Household Expenditures (May), German Mining and Industrial Production Index (May), Eurozone Retail Sales (May), U.S. Nonfarm Payrolls (June), U.S. Unemployment Rate (June), U.S. Average Hourly Earnings (June), etc.