Nikkei 225 wavers as Japan braces for the fastest wave of bankruptcies

The Nikkei 225 declined by about 78 points as investors braced for a new wave of bankruptcies in Japan. The index also reacted to weak results from Nissan and the rising trade risks from the region.

Nissan shares lag as company reports big loss

The biggest laggard in the Nikkei 225 was Nissan, the embattled automaker. The shares dropped by more than 10% after the company reported weak first quarter results. Its net loss increased to more than $6.2 billion, which was the worst in 20 years. The loss was even bigger than the $233 billion yen it reported at the height of the last financial crisis.

In a statement, the company attributed the losses to increased costs and a significant slowdown in demand as people remained at home due to the coronavirus. When making the announcement, the company said that it was embarking on a four-year cost cutting program that will result in a smaller and more efficient company. It will slash its production by 20% to 5.4 million cars every year. Also, it will slash its production line from 65 to less than 55 and cut fixed costs by more than 300 billion yen. Besides, the firm plans to sell more than 1 million electric cars in the next three years.

Shares of other automakers in the Nikkei 225 like Mazda, Mitsubishi, and Isuzu also slipped.

Japan inc. braces for bankruptcies

The Nikkei 225 also reacted to news that a new wave of bankruptcies is emerging in Japan. According to Teikoku Databank, the number of bankruptcies this year will climb to the most in seven years because of the coronavirus pandemic. The number of companies filing for bankruptcy is expected to jump to more than 10,000. In a statement, a manager at the databank said:

“This feels worse than the global financial crisis. There are concerns across sectors like department stores, hospitals, airlines, hotels and tourism bus operators and restaurants.”

Nikkei best and worst-performers

Other than Nissan, other laggards for the day were Nikon, Konica Minolta, NTN, and NSK, whose shares fell by more than 4%. The best performing stocks in the Nikkei were Toppan Printing, Daiichi Sankyo, Nicherei Corp, and Otsuka Holdings. All these rose by more than 3%.

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Nikkei 225 technical outlook

The Nikkei 225 is trading at ¥21,849, which is close to the highest level since February. On the daily chart, the price is above the 61.8% Fibonacci retracement. It is also above the 100-day and 50-day exponential moving averages. The bulls seem to be in total control, which means that they will next target the 78.2% retracement at ¥22,456.

On the flip side, a move below the 61.8% retracement level of ¥21,165 will invalidate this prediction because it will send a signal that there are still more sellers in the market.

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