The Nikkei-Topix gap is likely to stay in focus as long as the rotation out of AI persists, with price-weighted chip heavyweights able to sink the Nikkei on a broadly positive day. Lower oil is a direct support for Japan’s terms of trade, favouring importers and domestic sectors over energy-sensitive shippers. Afternoon results from Toyota, and from Sony and Nintendo after the close, could test whether the rally broadens further. Any rebound in crude on setbacks in Iran talks would remove the main pillar under the move.
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Earlier:
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Most of Japan’s market cheered cheaper oil; the handful of AI giants that move the Nikkei did not.
Summary:
- The Topix rose about 1.3% in early trade while the Nikkei slipped 0.5%
- 168 of the Nikkei’s 225 stocks rose, but heavyweight tech losses dragged the index lower
- Lower oil on hopes of an end to the Iran war lifted import-dependent Japan
- Advantest fell about 10%, Tokyo Electron about 9% and SoftBank Group around 5%
- Real estate, retail and pharma led; shipping was the weakest sector
Japanese stocks rallied broadly on Thursday as lower oil prices lifted most of the market, but a deepening selloff in AI and chip shares left the Nikkei 225 in the red, with SoftBank Group among the heaviest drags, Reuters reported.
The broader Topix rose 1.3% in early trade, after gaining as much as 2.4%, while the Nikkei slipped 0.5%. The split was stark: 168 of the Nikkei’s 225 members were higher, but losses in a handful of heavily weighted tech names outweighed them.
The rally was driven by oil. Crude fell sharply after Democrats won both chambers of Congress in the US midterm elections, raising hopes for an end to the Iran war. Cheaper energy is a clear positive for Japan, which imports almost all of its energy needs, mostly from the Middle East.
AI-linked stocks went the other way, extending Wednesday’s losses on expectations that Democratic gains will slow the pace of US data centre expansion. Chip equipment makers Advantest and Tokyo Electron fell about 10% and 9% respectively, and SoftBank Group dropped around 5%, also weighed by a post-results slide in its chip designer Arm. One strategist said money that had flowed into AI and semiconductors was moving into other sectors, though he did not expect US-China competition to allow the data centre buildout to reverse.
Investors rotated into domestically focused and defensive sectors. Real estate led with a gain of about 6.5%, followed by retail and pharmaceuticals, with Uniqlo owner Fast Retailing up about 8%. Toyota rose ahead of its results, while Sony and Nintendo also gained before their earnings after the close. Shipping was the weakest sector on prospects of lower freight rates if the Middle East conflict eases.
The session played out much as flagged in this morning’s preview: a broadly firmer Japanese market, held back in the Nikkei by its reliance on AI-linked heavyweights.
This article was written by Eamonn Sheridan at investinglive.com.