Stock market outlook.
Expected range: Upper limit 41,100 yen - lower limit 39,900 yen.
On July 5th, the U.S. stock market rose. The Dow Jones rose 67.87 dollars (+0.17%) to 39,375.87 dollars, the Nasdaq rose 164.46 points (+0.90%) to 18,352.76, and the S&P500 rose 30.17 points (+0.54%) to 5,567.19 at the close of trading. The Nikkei 225 futures, which was trading on the night session of the Tokyo Stock Exchange, ended trading at 41,010 yen, which is 150 yen higher than the previous day's closing price for normal trading.
On a daily basis, the Nikkei average has an upward deviation rate of 4.4% from the 25-day moving average line and 13.1% from the 200-day moving average line, with short-term overheating being scarce compared to the "25-day moving average line + 7% deviation" or "200-day moving average line + 20% deviation" seen from March to April. Individual stocks such as Mitsubishi Heavy Industries, which has risen for 10 consecutive days, are also notable, but the index is in a market where there is "the highest level without enthusiasm." As of July 4th, the psychological line (ratio of up and down movements in 12 business days) had risen to the level of being too bought, at 83% (10 wins and 2 losses), and as a result, it fell slightly on the previous day, but it can be attributed to natural adjustment as the announcement of the June U.S. employment statistics and the second French National Assembly elections are approaching. The sentiment of investors is good, as cyclical stocks such as marine transport stocks, financial stocks, precision machinery stocks, and semiconductor stocks are being bought one after another.
With the increase in the announcement of the first quarter performance of fiscal year ending march 2022 of companies in late July, there is a possibility that main stocks will be bought on the basis of expectations for the earnings results in the future. At the timing of the announcement of the first quarter earnings, I don't think that many companies will revise their earnings forecast upward early, but if foreign investors who have seen the "record high update of TOPIX" aggressively invest in Japanese stocks, there is a possibility that both the Nikkei Average and TOPIX will pursue the upside.
In the market, sales of listed exchange-traded funds (ETFs) are being watched out for as next week's earnings day approaches. It is estimated that there will be selling in order to generate distribution to investors, totaling around 1 to 1.3 trillion yen for both physical and futures stocks, according to calculations by securities companies. This is a topic that comes up every year at this time, so it is already factored in and the impact is limited. However, the annual high of the Nikkei average last year was on July 3 (33,753.33 yen), so it is a concern for investor psychology. Due to the negative events in supply and demand, active trading may be withheld and there is a possibility that the Tokyo market next week will be in a wait-and-see mood. It is assumed that there will be a small adjustment to cool down the overheated feeling towards the current upward trend, including individual stocks.
Note that the exchange rates are at the 160 yen to one dollar level. The observation of the Japanese government and the Bank of Japan's yen buying intervention is still strong, but the view is strong that it is difficult to implement a yen buying intervention as a rapid decline in the yen and an increase in the dollar is not progressing. From about two to three weeks before the Bank of Japan meeting, information from Bank of Japan officials begins to be disseminated, and attention will be paid to the trends in the foreign exchange and interest rate markets surrounding the Bank of Japan meeting leak information.
The schedule to watch next week:
Next week's dollar-yen may show some resistance to decline. There may be a temporary increase in selling dollars due to the easing of monetary policy and a slowdown in U.S. inflation indicators. However, cross-yen rates such as euro-yen, pound-yen, and Australian dollar-yen are keeping stable movements due to their awareness of the stock market's high levels. The short-term movement of the U.S. dollar-yen is likely to be influenced by the trend of cross-yen rates.
On July 2, Powell, the chairman of the Federal Reserve Board (FRB), spoke at a meeting hosted by the European Central Bank (ECB), indicating that despite recognizing the current downward pressure on inflation, confirmation of data confirming this is necessary prior to the rate cut. A nearly identical opinion is expected to be expressed during his testimony scheduled for the 9th. Long-term interest rate increases have been suppressed by his statement and there is a possibility of a slight reduction of risk-appetitive dollar-buying. Furthermore, the June U.S. consumer price core index (CPI), which is scheduled to be announced on the 11th, is expected to be +3.4% YoY. If the market expectation is met or lower, this may increase the possibility of a rate cut in September.
Schedule to watch next week:
July 8th (Mon): Monthly Labor Statistics (May), Bank of Japan Branch Managers' Meeting, Regional Economic Report (Sakura Report) (July, Bank of Japan), U.S. Consumer Credit Balance (May), Visit by Russian/Indian Prime Minister (Until the 9th), etc.
July 9th (Tue): Machine tool orders (June), Powell Federal Reserve Board (FRB) Chairman testifies at Senate Banking Committee, North Atlantic Treaty Organization (NATO) Summit (Until the 11th), etc.
July 10th (Wed): Domestic Corporate Price Index (June), China Consumer Price Index (June), China Producer Price Index (June), New Zealand Reserve Bank (Central Bank) announces policy interest rate, Powell FRB Chairman testifies at House Financial Committee, etc.
July 11th (Thu): Core Machine Orders (May), Foreign and Domestic Securities Investment (Last Week), UK Mining Industrial Production Index (May), Germany CPI (June), U.S. Initial Jobless Claims (Last Week), U.S. Consumer Price Core Index (June), Atlanta Federal Reserve Bank President's Speech, St. Louis Federal Reserve Bank President's Q&A, etc.
July 12th (Fri): Mining Industrial Production (May), Results of "Survey of Lifestyle Preferences" (98th edition) (Bank of Japan), U.S. Producer Price Core Index (June), University of Michigan Consumer Confidence Index Preliminary Report (July), etc.