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Nikkei 225 crawls higher as analysts question the $1 trillion stimulus


The Nikkei 225 index crawled back today as investors continued to focus on the global recovery. The index rose to more than ¥22,790, with most constituent companies being in the green. Other indices in the region like Hang Seng, Shanghai Composite, and China A50 were in the green.

Japan household spending falls

The Nikkei 225 index ignored weak data from the bureau of statistics. The data showed thar household spending in Japan declined by 11.1% in April from a year earlier. That decline, which was the worst performance since 2001, was mostly because of the state of emergency which Shinzo Abe declared.

The clothing sector was the worst performer, declining by more than 55%. It was followed by entertainment and travel, which fell by more than 33%.

In the same month, spending on food items and computers rose as more people move to work from home. Similarly, household’s expenditures declined by 10% even though incomes rose by 0.9%.

These numbers are important for most companies in the Nikkei 225 especially consumer brands and retailers.

Meanwhile, the market reacted to the postponement of a visit by China’s Xi Jinping. In a statement on Wednesday, Toshimistsu Motegi, the foreign affairs minister said that the visit should be delayed until after the G7 meeting. This is because the two sides are watching closely the emerging tensions between China and the US.

At the same time, the index rallied after data showed that the ¥223 trillion stimulus package was falling short of reaching small companies that employ 70% of people in Japan. This is after it emerged that more than 190 small businesses had gone bankrupt during the pandemic.

Best and worst performers in Nikkei 225

The best performing stock in the Nikkei 225 was Alps Electric, whose shares rose by more than 8%. It was followed by Dai-ichi Life, ANA Holdings, JFE, IHI, and Nippon Sheet Glass. The worst performers were Yahoo Japan, Kikkoman, Terumo, and CyberAgent.

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Nikkei 225 technical outlook

On the daily chart, the Nikkei 225 index is trading above the 78.6% Fibonacci retracement level. The index is also attempting to rise after two consecutive days of losses. Also, it is above the 50-day and 100-day exponential moving averages. Therefore, the index may continue rallying as bulls attempt to test the next resistance level at ¥23,000.

On the flip side, a move below the psychological level of ¥22,000 will invalidate this prediction. This price is also slightly above the important candle formed on February 27.