Nikkei
It was a mixture of red and green for the Nikkei 225 index as the market digested the latest trade and manufacturing data. The blue-chip index was barely moved at 06:13 (GMT), with the biggest gainer being Taiheyo Cement, whose stock rose by more than 12%.
The Nikkei 225 was unchanged after data suggested that the Japanese economy is not doing well. In April, exports declined by more than 21.9% while imports declined by more than 7.2%. Exports to the United States, Canada, and Western Europe declined by a substantial amount. That was particularly because these countries were in lockdown in April. As a result, the trade deficit widened to more than 930 billion yen in April.
Another data from Markit showed that the state of emergency was having serious impacts on the manufacturing and service sector. The manufacturing PMI dropped to a historic low of 38.4 from the previous 41.9. The sector has been contracting for the past eleven months. In the same month, the service PMI improved slightly to 25.3 from the previous 21.5. A PMI reading below 50 is usually a sign of contraction.
While these numbers were disappointing, they were expected. In the past, we have reported that companies like Toyota, Nissan, Mazda, and Honda were starting to cut production. Many other companies are either shutting or going out of business all together. Further, the country was in a state of emergency, meaning that very little activity was going on.
The Nikkei 225 also moved in reaction to news that Japan was starting to lift the state of emergency. This will appl in places like Kyoto, Osaka, and Hyogo next week. The emergency will remain in Tokyo, the biggest city.
A notable mention in the Nikkei 225 index was Mitsubishi Finance, which is one of the biggest banks in the country. The company said that it would shut more than 40% of its bank branches in the next few years. This will affect more than 8,000 employees in the country. This is higher than the previously announced 6,000. Other than a higher unemployment rate, the decision will affect the real estate sector.
The biggest movers in the Nikkei 225 index were Taiheiyo Cement, NKSJ Holdings, Hino Motors, and JGC Cop, whose stock rose by more than 3%. On the other hand, the biggest laggards were Amada, KDDI, Daiwa House, and Tokyu, whose stock declined by more than 2%.
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The Nikkei 225 index is trading at ¥20,594. On the daily chart, the index is on a strong upward trend and is being guided by the pink trendline. The index has moved above the 50-day EMA and is now attempting to move above the 100-day EMA. Therefore, I expect the bulls to remain in an upward trend as bulls attempt to test the 61.8% retracement at ¥21165.
On the other hand, a move below ¥20,338 will invalidate this upward trend. This price is along the 50% retracement and slightly above the 50-day EMA.