Top 3 reasons Japan’s Nikkei 225 Index is falling today

The Nikkei 225 Index slumped by nearly 4% today, June 8, as the recent rally took a breather. It retreated to ¥64,000, down from the year-to-date high of ¥68,670. This retreat was a reaction to the latest GDP data, global stock market retreat, and the continued US-Iran quagmire.

Top reasons behind the Japanese stock market crash

Japan stocks retreated by nearly 4% today, mirroring the performance of American shares on Friday. US stocks tumbled after the latest Broadcom earnings. While strong, the guidance was relatively weak, which dragged the broader technology sector downwards. 

It was a major wakeup call that stocks don’t go up forever. Indeed, a closer look shows that companies in the tech industry were among the top laggards. Kioxia Holdings dropped by nearly 10%, while Softbank tumbled by 8.63%. The other top laggards were firms like Renesas Electronics, Furukawa Electric, and IBIDEN. 

Japanese stocks also retreated as investors reacted to the latest Japan macro data, which showed that the economy was doing well, raising the possibility that the BoJ will hike interest rates. 

The report revealed that the Japanese economy expanded by 0.5% QoQ in the first quarter, higher than the median estimate of 0.3%. It rose by 1.8%, also higher than the expected 1.3%. 

This growth was driven by the rising external demand and private consumption, which jumped by 0.3% during the quarter. This growth was offset by a retreat in capital expenditure, which declined by 0.7% as companies remained cautious about the economy.

The Nikkei 225 Index also slipped because of the rising crude oil prices as the US-Iran quagmire continued. Brent, the global benchmark, rose by 3.37% to $96.26, while the West Texas Intermediate (WTI) rose by 3.57% to $93.7. 

These benchmarks rose because the quagmire between the two sides continued during the weekend. In an NBC interview, President Donald Trump maintained that talks were going on very well. However, there are no signs that this was happening.

Instead, the US threatened to use seized Iranian assets to fund the reconstruction of Gulf states, a move that will make prolong the ongoing ceasefire. Iran will not have an incentive to end the war, something that Trump desperately wants. 

There is also a likelihood that the Japanese stock market is tumbling as some investors dump their shares to participate in the upcoming SpaceX IPO. 

Nikkei 225 Index technical analysis

NI225 Index chart | Source: TradingView

The daily chart shows that the Nikkei Index has slumped sharply in the past three trading sessions, capping one of the most successful rallies in the recent past. 

It retreated to a low of ¥63,800, down sharply from the year-to-date high of ¥68,742. On the positive side, it has retested the lower side of the ascending channel pattern. 

It also remained above the 50-day Exponential Moving Average (EMA), a sign that bulls remain in control. Therefore, there is a likelihood that the rebound will resume once the panic selling ends. If this happens, the index may rebound and retest the year-to-date high of $68,742.