The Nikkei average continued to rise. At the end of the morning session, it closed at 38,732.41 yen, up 180.35 yen (+0.9 percent) (with an estimated volume of 12.46 million shares).

The previous day in the U.S. market, the Dow Jones Industrial Average closed at 42,011.59, down 184.93 points, and the Nasdaq closed at 17,918.48, down 6.64 points. Concerns over the worsening situation in the Middle East weighed on the market. However, there was a temporary recovery due to better-than-expected ISM non-manufacturing business conditions index, bringing it back to positive territory. Yet, U.S. President Biden's suggestion of a possible oil facility attack following Israel's retaliation against Iran increased crude oil prices and geopolitical risks, leading to accelerated selling and subsequent decline. Nvidia's rise in the semiconductor sector supported the Nasdaq but cautious profit-taking ahead of employment statistics data release led to a sluggish end.

Amid a declining U.S. stock market, buying predominated in today's Tokyo stock market. Although the major indices fell in the U.S. market yesterday, the Philadelphia Semiconductor Index, consisting of major semiconductor-related stocks, continued to rise, providing support for semiconductor-related stocks in Tokyo. The stability of the yen in the foreign exchange market provided reassurance. However, concerns about geopolitical risks in the Middle East persist, coupled with the upcoming release of the U.S. employment statistics for September tonight, contributing to a cautious buying stance and limiting the upward momentum.

In individual stocks, bank stocks like Mitsui Sumitomo and Mizuho performed well, while companies like M3, SoftBank Group, Sony Group, Fast Retailing, Mitsubishi Heavy Industries, Recruit Holdings, and Nintendo saw significant increases. Aoki Pharmaceuticals surged after announcing favorable first-quarter results and share buybacks. Companies like World, which exceeded previous financial estimates for first-half operating profit, also ranked high in terms of price increases.

On the other hand, shares in marine transportation companies like Kawasaki Kisen and Nippon Yusen, impacted by expectations of rising freight rates due to the end of the U.S. dockworker strike, were traded weakly. Shares in Disco, Toyo Electric, Toyota Motor, Fujikura, and Itochu declined. Expectations of declining U.S. interest rates led to downgrades in U.S.-based securities, resulting in substantial declines for Sumitomo Forestry and Kewpie, which also felt a sense of peaking out in the short term. Other companies like Mizuho, Ricoh, and Japan Display were among the top price decliners.

By sector, mining, petroleum and coal products, and banking sectors rose, while only marine transportation, transportation equipment, and warehouse and transportation-related sectors declined.

In the afternoon session of the Tokyo market, the lack of buyers seems likely to persist, and it should be anticipated that the Nikkei average might experience downward pressure. With the dollar-yen exchange rate hovering around 146 yen, it is providing some support for export-related stocks. Additionally, China has entered a major national holiday with improving investor sentiment towards China stocks after a sharp rise before the holiday boosted by economic stimulus measures and U.S. rate cuts. However, as tensions escalate in the Middle East causing widespread caution, Prime Minister Shizo Abe's policy speech is scheduled for this afternoon. While stating continuity in economic and energy policies from the previous administration under Kishida, market participants are eager to see the details. Moreover, with the release of the U.S. September employment statistics, it seems unlikely for strong buying momentum in the afternoon session of the Nikkei.