Japanese Stock Market Could Continue Friday's Downturn
The Asian stock market experienced a mixed performance on Friday, with some notable gains and losses, as the region navigates through the impacts of new U.S. tariffs and a weak American jobs report.
The Nikkei 225 finished the day at 40,799.60, marking a decrease of 270.20 points or 0.66 percent. In Japan, Nissan Motor accelerated 3.08 percent, Mazda Motor climbed 1.22 percent, and Toyota Motor advanced 1.04 percent. However, Honda Motor added only 0.51 percent, while Softbank Group tumbled 1.91 percent. Mitsubishi UFJ Financial collected 0.78 percent, Mizuho Financial sank 0.67 percent, and Sumitomo Mitsui Financial dropped 0.83 percent.
Elsewhere in Asia, the NASDAQ Composite closed at 20,650.13, down by 472.27 points or 2.24 percent. The S&P 500 followed suit, ending the day at 6,238.01, down by 101.38 points or 1.60 percent.
Crude oil prices fell on Friday due to demand concerns for potentially reduced consumption amid new tariffs from the U.S. government. West Texas Intermediate crude for September delivery was down $1.92 or 2.77% at $67.34 per barrel.
Despite these challenges, the outlook for Asian markets remains cautiously optimistic. The current environment is supported by policy stimulus and technological growth, particularly in China and parts of East Asia.
Key points supporting this view include:
- Despite lower earnings growth expectations for China in 2025, outlooks anticipate stabilization due to ongoing policy support and AI-driven growth, which could lead to an upward valuation re-rating of Chinese equities.
- Investor sentiment in Japan is improved with easing political uncertainty and a trade deal with the U.S., positioning Japanese equities as a core holding. Additionally, excess gains in Japan could be rotated into preferred Chinese and Korean markets, signaling confidence in broader Asian equities.
- The recent weak U.S. jobs report, combined with tariffs, has not dampened enthusiasm entirely. The market mood is somewhat bolstered by expectations of Federal Reserve rate cuts and generally favorable policy environments, especially in China, which is staging a resurgence.
- Global markets, including Asian ones, are entering a period of typically higher volatility ahead of October, which might create selective opportunities rather than broad weakness. Defensive sectors may be attractive during such times.
- Supply chains in Asia Pacific are adapting to trade policy changes; major ports continue to operate with manageable delays, indicating resilience amid shifts in trade dynamics.
Looking ahead, Japan will release July figures for monetary base on Monday. In June, the base was down 3.3% on year. Meanwhile, the Dow Jones Industrial Average closed at 43,588.58, down by 542.42 points or 1.23 percent.
[1] Source: MSCI [2] Source: Bloomberg [3] Source: UBS [5] Source: Reuters
- Amidst the falling crude oil prices and mixed Asian stock market performance, investors are maintaining a cautiously optimistic outlook, supported by policy stimulus, technological growth particularly in China, and the resilience of Asian Pacific supply chains amid trade policy changes.
- In the coming days, with Japan releasing the July figures for monetary base, and global markets entering a period of higher volatility, there may be selective opportunities in defensive sectors, as investors seek to rotate excess gains from Japanese equities into other preferred markets in Asia such as China and Korea.
