In the morning trading three days ago, we should pay attention to the following three points.

Expectations for a solid market development led by high-tech stocks.

Ito En, 2Q operating profit decreased by 15.6% to 14.3 billion yen.

Highlight materials for the morning session: Kawasaki Heavy Industries re-resources automotive batteries, recovering lithium carbonate with a purity of 99.5%.

Expectations for a solid market development led by high-tech stocks.

On the 3rd, the Japanese stock market is expected to show a strong sense of stagnation after an initial buy, but the firmness of the lower levels is likely to be conscious. On the 2nd, in the US market, the dow jones industrial average fell by 128 points, while the nasdaq rose by 185 points. Concerns about the rise in US long-term interest rates, geopolitical risks in the Middle East, and the crisis faced by the French cabinet due to the likelihood of a vote of no confidence raised selling pressure for profit-taking. Amid this, some tech stocks were bought, and the nasdaq index hit a new high. The clearing price of the Chicago Nikkei 225 futures was 38,615 yen, up 145 yen compared to Osaka. The yen is trading around 149.50 yen per dollar.

The Nikkei average is likely to start slightly on the buy side, following the pattern of the Chicago futures. In the US market, the rise of tech stocks is prominent, and the announcement that there is no evidence of improper accounting in the special committee's investigation regarding Super Micro could bright investors' sentiment. Due to the uncertainty around the tariff policy of the next US president Trump, active trading may be restrained, but a resilient market led by tech stocks is expected.

The Nikkei 225 futures showed movement supported by the 200-day line during the night session, approaching the 25-day line at one point. At the 25-day line level, selling targeting a retracement is likely to be seen, but if it clearly breaks above this line, there is also a possibility of strengthening short-covering, leading to a trend formation targeting the critical level of 39,000 yen. Thus, after an initial buy, during a softening phase, it seems likely to return to a stance aiming for a dip.

Additionally, the Nikkei average saw moments below 38,000 yen in the middle of the morning session yesterday, but the strong buying interest at levels below 38,000 yen has been confirmed. After that, while the 75-day line was being acknowledged as support, the movement approached the 200-day line and the 25-day line. If the market clearly breaks above the area where both lines are positioned around 38,650 yen to 38,690 yen, a strong trend led by tech stocks is expected.

On the other hand, the yen is once again hovering around 149 yen against the dollar, thus a stronger yen becomes a burden. In the Middle East situation, reports indicate that the Iranian-aligned militant group Hezbollah attacked Israeli military bases. Attention should be paid to the potential burden of geopolitical risks.

In terms of selection, besides tech stocks, funds are likely to flow toward AI-related Australian small/mid cap stocks as well. On the other hand, yesterday, the weak movement of Fast Retailing <9983> became a burden on the Nikkei average. If it shows a self-sustaining rebound, index buying of the Nikkei average type may easily occur.

Ito En, 2Q operating profit decreased by 15.6% to 14.3 billion yen.

Ito En <2593> announced that for the second quarter of the fiscal year ending April 2025, revenue increased by 4% year-on-year to 252.3 billion 21 million yen, while operating profit decreased by 15.6% to 14.3 billion 89 million yen. Due to the record-breaking heat wave, sales remained steady, particularly for the "O~i Ocha" brand products. In the food and beverage-related business, Tully's Coffee Japan also performed well. However, the soaring prices of raw materials and supplies, especially for vegetable juice and PET bottle containers, impacted the results, and advertising expenses increased due to a global contract signed with Major League Baseball player Shohei Ohtani.

Materials of concern in the morning session

The nikkei average has risen (38513.02, +304.99)

The nasdaq composite index has risen (19403.95, +185.78)

The chicago nikkei futures have risen (38615, +145)

The sox index has risen (5055.32, +128.76)

The vix index has decreased (13.34, -0.17)

U.S. crude oil futures have risen (68.10, +0.10)

Active share buybacks

Request for improvement in corporate value by the Tokyo Stock Exchange.

Kawasaki Heavy Industries <7012> is recycling vehicle batteries, recovering lithium carbonate with a purity of 99.5%.

Daihen <6622> is expanding collaborative and transport robots, with a global strategy model to be introduced next spring.

・Shimadzu Corporation <7701> enters the gene therapy market, invests in Osaka University startup, establishes analysis and evaluation methods, etc.

・Resonac <4004> forms fine copper circuits, photosensitive films for AI semiconductors.

・NTT <9432> NTT Communications establishes a new company for land-based aquaculture research, utilizing ICT in chemical reaction filtration technology.

・Sumitomo Chemical <4005> sells radioactive pharmaceuticals subsidiary shares to GE Health Care in the UK.

・SBI <8473> DMM Bitcoin business closure, May's fraudulent outflow affected, customer assets transferred to SBI group.

・Mitsubishi Heavy Industries <7011> receives an order for 24 MOX fuel assemblies for the Ikata nuclear power plant.

・Sumitomo Heavy Industries <6302> opens the India headquarters next month.

・Meidensha <6508> transformer demand increases by 1.5 times for renewable energy electricity.

Mitsui E&S <7003> received orders for port cranes in the USA, with eight near-zero emission types.

Kanadebia <7004> received order for waste incineration power generation in the UK.

Omron <6645> direct current power relay, shortening processes, gas-free structure.

Sumitomo Electric <5802> will collaborate with DPS to recover palladium from wastewater at their Vietnam FPC site.

Panasonic HD <6752> AI efficiently generates target images for use in home appliances.

☆ Schedule of events in the morning session

08:50 November monetary base (October: -0.3% year-on-year).

・09:30 Australia Q3 current account balance (financial estimates: -10.9 billion australian dollar, Q2: -10.7 billion australian dollar)