Here’s why Nikkei 225 moment of reckoning has just arrived
The Nikkei 225 index declined by more than 2.50% as investors reflected on the dovish tone set by the Federal Reserve. In its rates decision, the bank left interest rates unchanged and said that they will remain so for at least two years. Japan stocks also reacted to the sluggish sentiment among Japan’s large businesses. Almost all companies in the Nikkei were in the red today.
Japan stocks fall as business sentiment falls
Large businesses in Japan are pessimistic about the future. That is according to the latest data by Finance Ministry and Cabinet Office.
The data showed that confidence in large companies valued at more than $9.3 million dropped to minus 47.6 in the first quarter from minus 10.1 in the previous quarter. This was the lowest level the index has been in since the last financial crisis in 2009 when it dropped to 51.3. The number was weaker than the minus 22 that was reported in April.
Statisticians in the Cabinet office calculate this data by getting information from about 14,500 companies. They collect the data and then calculates the percentage of firms reporting worse conditions from those observing improvements.
The worst-affected companies were in those in the manufacturing sector, where sentiment dropped to minus 52.3. Nonmanufacturers sentiment fell to minus 45.3.
There were two main causes of this weakness. First, companies were scared about the impact of the virus and how much it would hurt spending. Second, sentiment declined because of the postponement of the Olympics.
Best and worst performing companies in the Nikkei 225
Almost all companies in the Nikkei 225 were in the red today. The worst performing entity was T&D Holdings, which is a major insurance company in Japan. The stock declined by more than 8%. The stock was followed by Takara Holdings, whose shares fell by more than 8%. The firm is a pharmaceutical company that owns Takara Shuzo, Takara Shuzo International, and Takara Bio. Mitsui Engineering, Nissan Motor, Kawasaki Kisen, and Hino Motors were the next laggards in Nikkei 225.
On the other hand, the best-performers in the Nikkei index were CyberAgent, Yaskawa Electric, Chugai Pharmaceuticals, and NTT Docomo, whose share price rose by less than a percentage point.
If gold prices were to trade above the October 25 high of $1518.41, then the price might be able to reach the $1563.14 level, as the difference between the upper and lower limit of the pattern is added to the October 25 high. On a break to the October 11 low at $1473.68, the price might be able to reach the $1428.95, as the difference in the range is subtracted from the October 11 low.
Time will tell if bullish or bearish traders will command price as the chart pattern itself is neutral in its outlook.