Outlook for tomorrow's stock market: "MLCC rhapsody" riding the melody of AI special demand

The Nikkei Stock Average fell 306 points to close at 64,693 on Thursday, snapping its recent winning streak despite record-setting gains on Wall Street overnight. While the market has effectively entered the June trading phase, price action continues to defy retail investor expectations. In the previous session, the Dow Jones Industrial Average and the Nasdaq Composite both marched to fresh all-time highs. Although Japanese equities were initially expected to track this risk-on sentiment, the Nikkei remained directionless in morning trading before breaking sharply lower in the afternoon as investors reacted to sudden developments in the Middle East.

Reports of early-morning U.S. airstrikes on Iranian military facilities and subsequent retaliatory strikes by Tehran on a U.S. airbase shattered recent optimism over ceasefire talks. The escalation triggered automated algorithmic selling, dragging the benchmark index down by more than 1,100 points into the 63,000-yen range after the midday break. However, sharp short-covering quickly kicked in, prompting a swift rebound that allowed the Nikkei to claw back most of its intraday losses and finish the session in the upper 64,000-yen territory.

Market focus is shifting to key policy decisions in mid-June, starting with the Bank of Japan’s (BOJ) monetary policy meeting on June 15-16, followed closely by the Federal Open Market Committee (FOMC) on June 16-17. The BOJ is widely expected to implement a 25-basis-point interest rate hike, with market participants already pricing in a move either in June or July. Concurrently, expectations for near-term Fed rate cuts have vanished. U.S. President Donald Trump has indicated he will leave monetary policy to the new Fed Chairman Christopher Waller, who remains constrained by political concerns over high inflation and gasoline prices. Consequently, the FOMC is highly likely to maintain the status quo, though investors will closely scan Waller’s press conference for hawkish rhetoric.

Ahead of the policy meetings, investor attention centers on the April U.S. Personal Consumption Expenditures (PCE) price index, due Thursday evening. Consensus forecasts project the headline index to rise 3.9% year-on-year on soaring crude prices, with the core index remaining sticky at 3.3%. Market strategists note that unless the data significantly overshoots expectations, it is highly unlikely to prompt an unexpected rate hike at Waller's upcoming debut.

In equity sectors, profit-taking hit leading artificial intelligence and semiconductor shares that had previously driven the market higher. However, capital rotated into AI data center infrastructure rather than exiting the market entirely. Multilayer ceramic capacitor (MLCC) makers and peripheral stocks drew heavy inflows. Sector heavyweights such as Murata Manufacturing <6981>, Taiyo Yuden <6976>, and TDK Corp <6762> showed notable strength, while Nichicon Corp <6996> also attracted sustained investor interest.

The thematic buying extended to MLCC material suppliers, where Nikkato Corp <5367> experienced highly volatile trading and Ishihara Sangyo Kaisha <4028>?which operates an MLCC material joint venture with Murata?gained recovery momentum. In the closely linked quartz crystal sector, Daishinku Corp <6962> followed the rapid rise of Nihon Dempa Kogyo <6779>. Similarly, AI data center power solutions and storage batteries emerged as a key focal point, lifting stalwarts like Panasonic Holdings <6752> and GS Yuasa <6674>, while drawing speculative interest to alternative plays such as Renova Inc <9519> and Seiko Electric <6653>.

Looking ahead to Friday, Japan will release a cluster of economic data before the market open, including the April unemployment rate, the job openings-to-applicants ratio, May Tokyo CPI, and April preliminary industrial production and commercial statistics. JGB auctions for 3-month Treasury bills and 2-year bonds will take place during the morning session. The afternoon will bring April automobile exports, the May consumer confidence survey, and April housing starts, followed by official foreign exchange intervention data after the close. Internationally, investors will monitor the May U.S. Chicago PMI and a scheduled speech by Federal Reserve Governor Michelle Bowman.

Source: MINKABU PRESS

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