The Nikkei 225 is the worst-performing index in Asia today as traders digest multiple news from the country. The index is trading at ¥22,050, down by more than 400 points. This is a sharp underperformance considering the Hang Seng is down by just 1% while the Shanghai index is down by 0.75%. A look at the Nikkei’s components shows that only a handful of the companies are in the green.
Nikkei falls as coronavirus cases jump
There are several reasons why the Nikkei 225 is down sharply today. The biggest reason is that the number of coronavirus cases in Japan has continued to rise, especially in Tokyo. Health officials reported 60 new infections on Sunday and 57 on Saturday. Still, analysts believe that the country is managing the disease well. They also say that the new cases do not point to a second wave of the disease. The wave will be confirmed if cases in Tokyo reach 70 per day.
At the same time, most companies in the Nikkei 225 do a lot of business in the United States. Examples of these are Nissan, Toyota, and Mitsubishi. During the weekend, the country continued to see high numbers of fresh infections especially in states like Florida, Texas, Georgia, and Arizona. The rising cases could affect companies in the Nikkei index.
Japan- South Korea tensions
The Nikkei 225 index is also down because of the simmering tensions between Japan and South Korea. As you recall, the two countries went into a trade war in 2019, which contributed to Japan’s recession during the year. In essence, Japan barred some of its companies against selling goods to the country. That limited some of South Korea’s biggest companies like Samsung and LG.
Over the weekend, tensions between the two countries escalated as news emerged that Japan had opposed the inclusion of Korea into G7. Japan said that South Korea was out of lockstep with G7 members on issues like China and North Korea.
Meanwhile, the Nikkei 225 also reacted to news that activist investors were conducting campaigns against Japanese companies at record pace. These investors have submitted their proposals to the AGMs of 23 public firms like Asahi, Nishikawa Rubber, and Musahi Corp.
Nikkei 225 top movers
Only a few companies in the Nikkei 225 index are in the green today. Among the big movers are Meiji holdings, Sumitomo Osaka, and Comsys Holdings, which are up by more than 1%. A vast number of the firms are in the negative territory, including SKY Perfect, Mitsui Engineering, Canon, Nippon Sheet Glass, and Dentsu.
The Nikkei 225 index is trading at ¥22,021, which is the lowest it has been since June 16. On the daily chart, the price has moved below the ascending trendline, which shown in black. This line connects the lowest points on April 22, May 15, and June 15.
It also moved below the 50-day exponential moving averages. Importantly, the price is now between the 78.6% and 61.8% retracement level. This Fibonacci joins the lowest and highest points this year. Therefore, it seems like bears are in control, which will see the price move lower as bears attempt to test the 61.8% retracement at ¥21164.
On the other hand, a move above ¥22,484 will invalidate this thesis. This is an important price along the 78.6% retracement.