EBC Markets Briefing | Japanese stocks ease but robust earnings surprise

The Nikkei 225 fell on Monday as traders awaited policy speeches this week in the US and Japan. Treasury Secretary Bessent threatened "the single greatest financial offensive ever" against Iran.

Japanese corporate earnings surged past expectations by the widest margin in 5 years, proving resilient against high oil prices and igniting optimism that a market rally can spread well beyond the AI sector.

Although tech stocks dominated recent quarterly gains, the latest earnings season revealed widening profit growth as businesses successfully passed rising costs onto consumers.

The results came even as a preliminary estimate showed Japan's economy unexpectedly slowed in Q2, reflecting weakness in domestic consumption and capital spending.

A weak yen adds to the tailwinds after a historic move to support the yen backfired. Instead of weakening the carry trades, it gave a cheap entry point to rebuild short positions.

That has reinforced expectations that the yen will remain under pressure unless the BOJ raises rates enough to materially narrow the bond yield gap with the US.

EBC Financial Group analyst says that the Nikkei 225 showed a classic price reversal pattern formed at the bottom area. The 65,650 line has now flipped from a prior resistance into a critical support level.

Asset Recap

As of market close on 21 August, among EBC major products, Tesla shares led gains following the announcement of a European launch event for the Tesla Semi.

Morgan Stanley analyst David Arcaro maintains Sempra with a buy rating, and adjusts the target price from $108 to $104. The company has completed sale of Mexican gas distributor Ecogas.

Gold prices climbed, putting bullion on course for a weekly gain of nearly 5%, as bond market jitters, a softer dollar and renewed concerns over US debt helped revive demand for the precious metal.

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EBC Financial Group Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC Global Financial Collaboration or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.