Tokyo stocks seen falling sharply on oil price surge and rising yields

The Tokyo stock market is expected to see selling pressure concentrated in AI and semiconductor shares on the 2nd, with the Nikkei Average likely to probe lower levels. While the index fell for two straight sessions previously, losses on both days were modest, remaining under 100 yen each. However, a steeper decline is possible today.

On the previous day, risk-off sentiment intensified from European trading hours, pushing markets broadly lower. Germany's DAX index, which set a record high the previous week, also softened this week, falling more than 1% to its lowest level in about a month. Surging crude oil prices driven by Middle East tensions dampened investor sentiment amid heightened inflation fears.

In the U.S., the Dow Jones Industrial Average and two other major indices fell for a third straight session. Among them, the tech-heavy Nasdaq Composite - which has a higher concentration of tech stocks - posted a steeper percentage decline than the Dow. Reports emerged that two large oil tankers were attacked in the Strait of Hormuz, and the U.S. launched airstrikes against Iran, sending WTI crude oil futures surging above $90 per barrel and further stoking inflation concerns. The U.S. 10-year yield rose to 4.80%, cooling investor sentiment.

Tokyo markets are widely expected to follow suit. The Philadelphia Semiconductor Index (SOX) fell more than 2% in U.S. trading, reinforcing headwinds for semiconductor stocks. Domestically, the yield on newly issued 10-year Japanese government bonds rose above 3%, keeping market participants on edge. A scenario in which the Nikkei Average dips below the 65,000 yen level is also conceivable.

On the 1st, U.S. stocks saw the Dow Jones Industrial Average fall 419.02 points from the previous session to close at 52,766.88, marking a third straight day of losses. The Nasdaq Composite fell 271.12 points to 26,099.77.

On today's domestic calendar, August monetary base data and the August fiscal funds balance are scheduled for release. Bank of Japan Policy Board Member Hajime Takata will speak at a financial forum in Sapporo, followed by an afternoon press conference. Overseas, the Reserve Bank of New Zealand and the Bank of Canada are set to announce policy rate decisions. Other releases include the August ADP National Employment Report, July U.S. factory orders, and the Federal Reserve's Beige Book.

Source: MINKABU PRESS

*Translated by generative AI. Click here for the original article.