[Fundamental viewpoint]
In the U.S. markets last week, stock indices rose for the week as NVIDIA rose after announcing its quarterly earnings results and outlook, and buying spread among mainly high-tech and semiconductor stocks.
Weekly change NY Dow:+1.30 NASDAQ:+1.40%, S&P 500:+1.66%.
On the other hand, medium- to long-term
risks include concerns about the prolonged conflict in Ukraine, energy costs,
financial instability and global economic slowdown due to rising interest
rates, and the collapse of the real estate bubble and economic slowdown in
China. This also raises concerns about the arrival of stagflation. In addition,
geopolitical risks in East Asia and the Middle East continue to require
attention.
The difference in the yield spread between
the Japanese and U.S. markets is 4.36 points undervalued in the Japanese market
when the revised OECD nominal GDP forecast for 2025 is taken into account. The
undervaluation is due to the difference between the S&P 500's P/E ratio of 21.3
and the Nikkei 225's P/E ratio of 16.6, the difference between the U.S. and
Japanese interest rates, and the difference in GDP growth rates.
This means that if the difference in GDP growth between Japan and the U.S. in
2022 is 4.36 points larger than the OECD forecast (Japan is revised downward or
the U.S. is revised upward), or if the current year's forecast PER of the Nikkei
Index stocks is around 60.0, or if the Nikkei Index is around 141,340 yen, the
Nikkei Index will be at the same level as the current Nikkei Index price. 102,240
yen,
From a fundamental perspective, the Japanese market can be said to be about 102,240 yen less attractive than the U.S. market. Weakness in the Japanese market diminished last week.
[Conditions for Nikkei average rise]
In the future, the following assumptions are necessary for the Nikkei average to rise further.
① Rising US market
② Increase in profit forecast for the current fiscal year above the previous year's level
③ Further depreciation of the yen due to the widening interest rate gap between Japan and the U.S.
④ Upward revision of Japan's 2023 GDP estimate (now +3.5%) by OECD
⑤ Foreign investors over-buying
Looking at recent movements
① Last week's NYDow's weekly chart was a positive line. The daily chart is above the 200-day line and the clouds of the Ichimoku Kinko Hyo. The NASDAQ has a positive weekly line. The daily price is above the 200-day line and the Ichimoku cloud. This week, we will focus on whether or not the NY Dow can keep above the 25-day line.
② As a result of the announcement of quarterly financial results, the forecasted ROE of the Nikkei 225 indexes came in at +9.0%, an improvement of 0.2 percentage points from three months ago. Profit growth was +11.7%, an improvement of +2.1 percentage points from three months ago.
③ The U.S. long-term interest rate fell and the interest rate differential between the U.S. and Japan narrowed from 3.56 to 3.54, causing the dollar to move against the yen in the range of ¥149 to ¥150. The dollar index fell -0.05% for the week.
④ The OECD's nominal GDP growth rate for Japan and the U.S. in 2025 is expected to be +3.4% for Japan and +3.9% for the U.S., so the Japanese market is 0.5 percentage points inferior in this aspect.
⑤ The second week of February was overbought, the third week of February was likely overbought, and this week is expected to be overbought. Of the five points last week, ①, ③, and ⑤ were bullish. ①②③⑤ are expected to have an impact.
[Technical viewpoint]
From a technical perspective, the Japanese market is overvalued by 5.0 point in the medium to long term in terms of the difference in 200-day divergence from the NASDAQ (about 1950 yen when converted to the Nikkei 225). On the other hand, the difference in the 200-day divergence from the NYDow is 7.8 points (about 3050 yen in terms of the Nikkei average) overvalued in the medium to long term.
The Japanese market turned overvalued relative to the U.S. market. The VIX, a measure of U.S. market volatility, declined to a weekly low of 13.8. The Nikkei VI declined to a weekly low of 19.6. The U.S. market is optimistic and the Japanese market is quite optimistic.
The Nikkei 225 is above the 9-day and the 25-day lines. This is a "green light" for the short-term trend.
The Nikkei 225 is above chimoku Kinko Chart's cloud, and the Nikkei 225's total divergence is +37.9%The divergence between the Nikkei 225 and the 200-day moving average was +18.7%. Since the three factor is positive, a "green signal" is lit for the medium-term trend.
In the U.S. market, the NYDow is above the
9-day line and the 25-day line and the 200-day line. It is above Ichimoku Chart
cloud.
The NASDAQ is above the 9-day line and the 25-day line and the 200-day line. It
is above the Ichimoku Kinko's cloud.
This is a " green light" in the short term and a "green
light" in the medium term.
[Outlook for this week]
Looking at the U.S. market from a fundamental perspective, concerns about a global economic slowdown due to the spread of the new coronavirus have receded, but risk factors include inflation and rising interest rates due to the Russia-Ukraine war and economic slowdown due to energy shortages and deteriorating political conditions in the EU, U.S.-China trade friction, financial market turmoil caused by the bursting of the Chinese real estate bubble and credit contraction, and geopolitical risks in the Middle East and East Asia.
Recent LIBOR rates have been on the rise, and we continue to be wary of a resurgence of financial instability.
Looking at the technical aspects, the U.S. market is in a medium-term up trend and a short-term up trend. The Japanese market is in a medium-term up trend, and the short-term is up trend.
Analyzing the foreign exchange market, the yen is at the 150-yen level for the first time since November 2023. This week, the yen is expected to be in the range of 149 to 151 yen.
T In the U.S. markets this week, investors will focus on the PCE price index, personal income, spending data, and speeches by Fed officials. In addition, key indicators such as ISM manufacturing PMI, revised GDP growth, durable goods orders, CB consumer confidence index, and new home sales will also be in focus. Internationally, inflation in Japan, Australia, and the Eurozone will be in focus. Also of interest will be China's manufacturing PMI and unemployment rates in Japan and the Eurozone.
Last week, the Nikkei 225 moved within its expected range. The upper price was about 650 yen below the assumed line and the lower price was about 380 yen above the assumed line.
This week, the Nikkei 225 is expected to move between the Bollinger Band +3σ (currently around 40020 yen) on the upside and Bollinger Band +1σ (currently around 37930 yen) on the downside.
This week, the Nikkei 225 is likely to be affected by the PCE price index, but it is likely to pause after challenging the 40,000-yen mark.
