Nikkei slips despite early rebound, investors cautious ahead of earnings

Nikkei share average: Japan's stock market experienced a choppy session on Wednesday, with the Nikkei share average on track for its third consecutive day of losses. This cautious mood reflects a combination of factors.

Ongoing tensions in the Middle East, particularly between Iran and Israel, continue to dampen investor sentiment. With Japan's earnings season approaching, investors are taking profits before key companies like Advantest (chip-testing equipment) report next week. Analysts anticipate some market weakness during this period as companies release guidance for the new fiscal year.

Mixed performance in US markets overnight, coupled with Federal Reserve Chair Jerome Powell's comments on potentially stricter monetary policy for a longer period, provided little support for the Nikkei.

The Nikkei started the day positively, rebounding from a recent low, but quickly slipped into negative territory by midday. The broader Topix index also experienced losses.

Trading activity was subdued, with only a small number of Nikkei constituents gaining ground. Several heavyweight stocks, including Advantest, KDDI (telecommunications), Sony, and Fanuc (factory automation), contributed to the decline.

However, there were some bright spots. Resonac Holdings, a chemical company, surged after revising its revenue forecast upwards for 2024.

Despite the recent pullback, the Nikkei remains up 15 per cent for the year so far. The near-term outlook suggests a potential range-bound movement around the 38,000-point level on the Nikkei, with investor sentiment likely influenced by the ongoing geopolitical situation and upcoming earnings reports.

(With Reuters inputs.)