The Nikkei 225 Index has pulled back and moved into a technical correction after falling by 13% from the year-to-date high. It dropped to 63,290, down from a high of 72,768 in June. This article looks at some of the top catalysts for Japanese stocks this week.
AI jitters to spread after OpenAI’s fundraising flop
The Nikkei 225 Index will likely be on edge this week as investors react to the ongoing jitters in the artificial intelligence industry. A major red flag in the industry is that OpenAI, the pioneer, is struggling to raise funds.
The company has been raising $30 billion at a $1.4 trillion valuation. In the end, the company raised $11 billion at a $1.25 trillion valuation. This happened a few days after Elon Musk warned that many neocloud companies will collapse because of the funding crunch.
In another major development, Blackstone warned that Anthropic will launch its IPO in a junk category.
These events are important for the Nikkei 225 Index because many of the large constituents are in the AI space. For example, SoftBank is a major investor in OpenAI, Arm Holdings, and Perplexity AI. Other top AI companies in the index that will be affected by this are Kioxia Holdings, Murata, Tokyo Electron, and Advantest.
Nikkei 225 Index to react to key Japanese earnings
The index will also react to the earnings reports by some of the biggest companies in Japan. Sumitomo will publish its results on Monday, while Mitsubishi, Mitsui, NTT, Marubeni, and Itochu will release their numbers on Tuesday. These are important numbers because Berkshire Hathaway is a big investor in Japan’s trading houses.
Nintendo, Daikin, Nippon Steel, and Z Holdings will release their numbers on Thursday, while Mitsubishi Heavy Industries, KDDI, Mitsui Fodan, and Yamaha Motors will release a day after that.
In addition to these earnings, the index will also react to earnings from top American companies like Apple, AMD, Arm Holdings, and Palantir Technologies.
Key Japanese macro data
The Nikkei 225 Index will also react to some important macro numbers, which will come a week after the Bank of Japan (BoJ) left interest rates unchanged. The BoJ will publish minutes of this meeting on Thursday, providing hints on what officials deliberated.
In addition, Japan will publish the latest manufacturing and services PMI numbers on Thursday, providing more hints on the health of the Japanese economy. Another important data will be the overtime pay on Friday. Strong numbers will raise the possibility of the BoJ hiking interest rates in the last meeting of the year.
US-Iran war
There is also a risk that President Donald Trump will restart his war against Iran after the midterm elections. One reason for this is that the odds of serious talks happening between the two countries have fallen recently.
Iran rebuffed a letter sent by JD Vance asking for talks, with officials maintaining that they will only talk if the US went back to the MoU. Iran has also maintained that it will talk about its nuclear program if the US fulfils its seven points.
A return to war will be highly bearish for Japanese stocks since it will lead to higher energy prices in the country.
READ MORE: Is the AI bubble bursting? In China, it has already burst
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