Global Markets: Japan’s Nikkei Dips Further from Record High Amid Waning AI Euphoria.

The Nikkei share average has exhibited a notable retreat, declining 1.3% to close at 66,588.12 on Friday, marking the second consecutive session of losses after reaching a record high earlier in the week. While the benchmark has managed a modest 0.3% gain for the week, the overall upward momentum seems to have slowed, particularly within the technology sector, which has faced increased volatility following underwhelming performance indicators from U.S. chipmaker Broadcom. The broader Topix also saw a slight decrease of 0.07%, closing at 3,949.09. Despite this pullback, year-to-date gains for the Nikkei sit at an impressive 34%, reflecting strong market sentiment leading up to this point.

One of the key takeaways from this week’s performance is the dual impact of falling tech stocks and rising real wages in Japan. Recent data indicating a 1.9% increase in real wages for April—marking a fourth consecutive month of growth—presents a positive counterbalance to the slowing tech momentum. Market analysts, such as Wataru Akiyama from Nomura Securities, argue that wage growth will likely facilitate increased consumer spending, thereby bolstering corporate performance across various sectors. This indicates underlying resilience in the Japanese equities market, with a reported count of 129 advancers in the Nikkei index against 96 decliners during Friday’s session.

Within the Nikkei index, technology suppliers emerged as the primary laggards, featuring significant declines in stocks such as Sumco, which fell by 7.4%, and Ibiden, which decreased by 6.9%. Conversely, the market displayed positive movements in other sectors, with notable gainers including Japan Steel Works, which surged by 9%, and Trend Micro, appreciating by 7.3%. These trends signal a possible rotation of investment focus away from heavily tech-oriented equities to sectors benefiting from improved wage-driven consumption. Observing such shifts can be crucial for investors as they assess future allocations in their portfolios, particularly in light of the current economic landscape.

Source: The Economic Times

(Expert Note: This report was prepared by the Wealthova team.)