The second session this week brings a spectacular reversal on the Tokyo Stock Exchange. Following the morning sell-off in Tokyo and setting the lowest levels since August 4, a spectacular V-shaped bounce occurred. JP225 contracts are already up 1.3%, exceeding 66,000 points. The breakout of the downward trend in the second part of the day was the result of calm in the currency market and a rapid influx of capital seeking undervalued assets.
What could be behind today's rebound?
- The morning panic subsided with the stabilization of the dollar index and US bonds. This reduced the pressure on foreign capital outflow from Asian emerging and mature markets.
- The strongest upward impulse was generated by the Japanese real estate, banking sectors, and companies from the components and cabling industry. Significant gains were recorded by Furukawa Electric (+10%), Ibiden (+6%), and Fujikura (+5%), among others. SoftBank, a technology giant critical to the index, gained 2.25%.
- Although oil prices remain high, today we observe another, almost 3% downward movement, which reduces investors' concerns about energy import costs, providing direct support for Japan's resource-dependent economy.
Weaker links of today's session
The rebound on the Japanese market was not universal. The automotive and energy sectors remained under strong selling pressure. The biggest losers in the index were Tokyo Electric Power, Yokohama Rubber, and Nissan Motor. The swift neutralization of the morning drops on the Nikkei 225 (similarly to South Korea's KOSPI) confirms that investors are using local lows to return to the market. Maintaining the USDJPY rate in the 159–160 range, while oil prices fall, creates favorable conditions for the continuation of optimism in the Japanese stock market in the coming days.
JP225 clearly rebounds, consolidating slightly above 65,000 points earlier. A key point for the bulls may be an attempt to reach the downward trend line, which can also serve as the neckline of the inverted Head and Shoulders (oRGR) formation. Breaking 67750 could lead to an attempt to attack new historical highs in the coming weeks. Source: xStation5
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