Stock market outlook.
Expected range: upper limit of 38,800 yen - lower limit of 37,800 yen.
This weekend's US stock market is mixed. The Dow Jones Industrial Average closed at 39,150.33, up 15.57 points (+0.04%) from the previous day, while the Nasdaq index closed at 17,689.36, down 32.23 points (-0.18%), and the S&P500 closed at 5,464.62, down 8.55 points (-0.16%). The Nikkei 225 futures in the night session of the TSE closed at 38,490 yen, down 110 yen from the normal trading closing price.
The trading volume in the prime market in June remained in the 3 trillion yen range on many days. During this period, the Nikkei average was in a narrow range of around 38,500 yen ± 700 yen, and the market continued with a trend of "no selling in the quiet market." The Nikkei average is steady due to the fact that there is no significant selling, but it is expected to lack direction in the market due to the summer doldrums.
Meanwhile, large-cap stocks with high market capitalization and trading value on the Standard Market, such as Japan McDonald's HD <2702>, Harmonic Drive Systems <6324>, Seria <2782>, and on the Growth Market, GNI Group <2160> , The purchase expectation of inclusion in the new TOPIX reform proposal announced by JPX Research on June 19 has been increasing. The total number of constituent stocks will decrease by 40% from the current 2100 stocks to about 1200, and a total of about 50 stocks will be included in the Standard Market and Growth Market. This is negative for the supply and demand situation because there is a possibility of exclusion from the existing constituent stocks in the prime market. However, the weight reduction of transitional stocks will be phased in over about two years from October 2026, so the impact will be limited. At present, it is stimulating the Standard Market and Growth Market, and the Tokyo market is showing a positive reaction.
As of June 21, the dollar-yen exchange rate has reached 159 yen and 84 sen, with the trend of a weaker yen and stronger dollar continuing. On June 20, the US Treasury Department released its biannual foreign exchange policy report, adding Japan to its "monitoring list" to watch for currency manipulation. It has been a year since it was added to the list. The reason for this was that the total current account surplus in 2023, which was the target period for this time due to the recent decline in crude oil prices, exceeded the formal standard. There was no wording criticizing Japan's foreign exchange intervention from April to May this year. However, with the addition to the monitoring list, it may be slightly more difficult for the government and the Bank of Japan to intervene in the foreign exchange market.
On the 21st, Finance Minister Kanda made a comment that warned against excessive exchange rate fluctuations, saying, "Excessive exchange rate fluctuations have a negative impact on the economy," and that appropriate measures will be taken if there are excessive fluctuations in the exchange rate. At the same time, he also said, "The US foreign exchange report does not criticize Japan's approach." While this is true, considering that Treasury Secretary Yellen has put the kibosh on Japan's foreign exchange intervention, it is believed that vigilance regarding government and Bank of Japan yen-buying intervention has eased. With the possibility that speculative funds may pile up short yen positions, it is conceivable that the trend of a weaker yen and stronger dollar may accelerate, which would have a tailwind effect on stocks with high overseas revenue ratios.
The schedule to watch next week:
Is the rise in the dollar-yen rate slowing down next week? Following the victory of right-wing forces in the European Parliament elections, French President Macron dissolved his own parliament, and voting is scheduled for June 30. If the administration of the right-wing-led parliament is established, the relationship with President Macron will be delicate, and there is a possibility that the administration will become bogged down. For fiscal policy, an expansionary policy is expected, and a deterioration of the fiscal position is feared. If the deterioration of France's debt causes a decline in the stock market, there is a possibility that risk-averse yen buying will strengthen in anticipation of the end-of-month vote.
On the other hand, there is growing uncertainty about the monetary policies of the central banks of Japan, the United States, and China, following the meetings of the Federal Open Market Committee (FOMC) and the Bank of Japan's Monetary Policy Decision Committee held this month. If the growth of the US Core PCE Price Index slows down, there is a possibility of a retreat from the tightening policy, which could lead to a decline in interest rates and a weaker dollar. Although the Bank of Japan is cautious about financial normalization, Governor Uchida has shown a positive stance toward an additional interest rate hike in July, and the suppression of short-term risk appetite yen sales may occur.
Schedule to watch next week:
June 24 (Monday): Main opinions at the Bank of Japan's monetary policy meeting (June 13-14), Tokyo area department store sales (May), German IFO business sentiment index (June), San Francisco Fed President speaks, EU foreign ministers' council (European index), etc. June 25 (Tuesday): Corporate service price index (May), coincident index (April), leading economic index (April), US Consumer Confidence index (June), Federal Reserve Board (FRB) governors speak, Bowman FRB Governor delivers keynote speech, 2-year bond auction in the United States, etc. June 26 (Wednesday): Australian consumer price index (May), US new home sales (May), FRB announces annual bank stress test results, 5-year bond auction in the United States, etc. June 27 (Thursday): Retail sales (May), EU consumer confidence index (June), EU business sentiment index (June), Turkey's central bank announces policy interest rate, US GDP final value (Q1), Mexico's central bank announces policy interest rate, First TV debate for US presidential candidates, European summit (until 28th), etc. June 28 (Friday): Tokyo CPI (June), UK GDP revised value (Q1), US personal consumption expenditure (PCE) core price index (May), University of Michigan's Consumer Sentiment Index (June), Richmond Fed President delivers keynote speech, ECB predicts Eurozone CPI, Iranian presidential election, etc.
June 25 (Tuesday): Corporate service price index (May), coincident index (April), leading economic index (April), US Consumer Confidence index (June), Federal Reserve Board (FRB) governors speak, Bowman FRB Governor delivers keynote speech, 2-year bond auction in the United States, etc.
June 26 (Wednesday): Australian consumer price index (May), US new home sales (May), FRB announces annual bank stress test results, 5-year bond auction in the United States, etc.
June 27 (Thursday): Retail sales (May), EU consumer confidence index (June), EU business sentiment index (June), Turkey's central bank announces policy interest rate, US GDP final value (Q1), Mexico's central bank announces policy interest rate, First TV debate for US presidential candidates, European summit (until 28th), etc.
June 28 (Friday): Tokyo CPI (June), UK GDP revised value (Q1), US personal consumption expenditure (PCE) core price index (May), University of Michigan's Consumer Sentiment Index (June), Richmond Fed President delivers keynote speech, ECB predicts Eurozone CPI, Iranian presidential election, etc.