The Nikkei 225 Index Index remained on edge on Monday morning as investors waited for key corporate earnings and the Bank of Japan (BoJ) interest rate decision. It dropped to 62,423 points, down by nearly 15% from the highest point this year.
Nikkei 225 Index to react to key Japan and US corporate earnings
Many Japanese companies are starting to publish their financial results, which will provide more insights about their growth in the third quarter. Shin-etsu Chemical, Chugai Pharma, and Canon will be the first big names to release their earnings on Tuesday.
After that, Hitachi, Advantest, and Nomura will release on Wednesday, while Japan Tobacco, Takeda, Fujitsu, Toyota Tsusho, Komatsu, and Denso will release on Thursday. Finally, companies like Tokyo Electron, Mitsubishi Electric, Panasonic, Sumitomo Electric, and Murata Engineering will publish their numbers on Friday.
Some of these companies tend to move the Nikkei 225 Index. For example, firms like Murata Engineering, Tokyo Electron, and Advantest are barometers of what is happening in the artificial intelligence industry.
These earnings will come at a time when the biggest US companies are publishing their numbers. Top names in the Magnificent Seven like Microsoft, Alphabet, and Amazon will release their numbers this week. While these are American companies, their impacts are usually felt far and wide.
Bank of Japan interest rate decision
The other important catalyst for the Nikkei 225 Index will be the Bank of Japan interest rate decision on Friday. Economists expect the bank to leave interest rates unchanged at 1.25% as it observes the impact of the last hike.
Recent macro data suggests that the bank has room for more hikes in the future. The unemployment rate remains low, while the headline Consumer Price Index (CPI) jumped to 2l1% in September from 1.9% in the previous month. Inflation has been in a gradual increase after bottoming at 1.3% in February.
The Nikkei 225 Index will likely remain under pressure if the central bank suggests that it will hike interest rates.
In addition to the BoJ actions, the Nikkei 225 Index will react to the upcoming Federal Reserve decision on Wednesday. Analysts expect the bank to leave interest rates unchanged in this meeting.
US-Iran conflict and oil prices
Japan stocks will also react to the ongoing US-Iran conflict that could escalate in the next two weeks. Israel will have its general election on Tuesday, while the US midterm elections will follow next week.
The conclusion of these elections will clear the stage for more intense bombing of Iran. Iran, on the other hand, has warned that it will retaliate against key targets in the region, a move that will push crude oil prices higher.
Nikkei 225 Index technical analysis
Nikkei 225 Index chart | Source: TradingView
The daily chart shows that the Nikkei 225 Index has slipped in the past few weeks, moving from a high of 70,718 points earlier this month to the current 62,520.
It remains above the 200-day moving average, which has provided it with adequate support in the past few years. It has also formed a small doji candlestick patten, suggesting that a rebound is possible. If this happens, the index may rebound to the psychological level of 65,000 points.
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