Nikkei Enters Choppy Waters: Financials Weak

Japan’s Nikkei went through choppy waters on Thursday as the minutes from the U.S. Federal Reserve meeting made the rounds. The minutes reinforced the dovish policy stance as investors waited to learn about Yaskawa Electric’s earnings.

Yaskawa Electric is an industrial equipment maker with plenty of exposure in China. The company usually kicks off the earnings season in Japan and was scheduled to declare its annual results later today. Yaskawa’s result often acts as an indicator of Chinese demand and is thereby often monitored by investors to see whether it will be a good precedent for other Japanese manufacturers.

The Nikkei share average went down by 0.3 percent to 21,627.8 during the midday break after it moved into positive territory when short-term investors went on to buy futures when the dollar went above 111 yen.

Topic fell by 0.4 percent to 1,600.60. This resulted in Nikkei outperforming Topix.

According to Hiroyuki Ueno, a senior strategist at Sumitomo Mitsui Trust Asset Management, short term investors like hedge funds are often traded on Nikkei futures. He also said that only short term investors are likely to trade now. Ueno also mentioned that with the Japanese Market taking a break with the 10-day Golden Week holiday, it was unlikely that long term investors would take positions now.

According to Ueno, many upcoming big events like the U.S.- China trade issue and other U.S.-Europe matters have a hand in Nikkei’s movements. However, he expects Nikkei to stay range-bound for the time being.

Financial stocks seem to have lost ground as U.S. Treasury yields were weakened as tame U.S. inflation data indicate that the Federal Reserve will probably hold interest rates steady or even cut them till the end of this year.

Mitsubishi UFJ Financial Group went down by 2.3 percent as insurers T&D Holding dropped 3.1 percent. Dai-ichi Life also declined by 2.3 percent as Ryohin Keikaku stumbled thirteen percent after the company expected a six percent fall in its total net profit for this year.

It is not a surprise to see short term investors trading on futures as long term investors stay away for the time being. Investors are currently staying focused on Yaskawa earnings to see how the future bodes for other Japanese manufacturers. With Yaskawa Electric having plenty of Chinese exposure, the company’s earnings give a clear indication of how the results will be for other Japanese manufacturers.

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