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What’s happening: The Nikkei 225 Index climbed more than 1% this morning, despite market sentiment being hit by Middle East tensions.
What happened: Global stock markets fell sharply on Friday on news of Israel conducting airstrikes against Iran overnight.
Japan’s stock market, which typically mirrors sentiment in the US equity market, rose this morning due to weakness in the yen.
Why it matters: The Japanese stock market had been under pressure in the first quarter on growing concerns over the country’s fiscal health and borrowing costs.
Investor sentiment for Japanese stocks was lifted last week on hopes of the government exploring a buyback of long-dated bonds to stabilise the market and contain rising yields.
Japan’s Nikkei 225 rose this morning even as the conflict between Israel and Iran continued and the global equity markets fell sharply. Sentiment was supported by a weaker yen, which makes exports from Japan more competitive in international markets.
Chipmaker Advantest’s stock spiked 8%, while shares of Honda Motor and Nissan Motor rose 3.4% and 1%, respectively, due to the weaker Japanese yen.
Some analysts commented this morning that investor concerns around the Israel-Iran conflict may be contained with hopes of countries like the US and Russia stepping in.
Japan’s Nikkei 225 climbed 1.13% to 38,260.59 this morning.
What to watch: Investors await the Bank of Japan’s interest rate decision tomorrow, with markets widely expecting officials to keep the benchmark rate unchanged at 0.5%.
Context: The EUR/USD forex pair declined this morning amid escalating Middle East tensions.
Details: The euro came under pressure this morning after surging to a three-and-a-half-year high on June 12, as investors remained concerned about rising tensions in the Middle East.
Meanwhile, the latest comments from European Central Bank members fuelled speculations of a pause in the monetary policy easing cycle to monitor the impact of US tariffs.
Data released on Friday showed that the Eurozone’s trade surplus shrank to €9.9 billion in April, from €13.6 billion in the year-ago period. The figure also came below market estimates of €18.2 billion. The latest reading signalled a steep decline from March’s record high level of €37.3 billion due to the latest US tariffs.
Eurozone’s industrial production declined by 2.4% in April, following a 2.4% increase in March. This, too, failed to meet market projections of a 1.7% decline.
Strength in the greenback weighed on the EUR/USD forex pair this morning. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained more than 0.1% to 98.31.
The EUR/USD pair fell around 0.2% to 1.1533 this morning, while the EUR/GBP forex pair edged higher to 0.8514.
What to watch: Investors await the release of economic data on Eurozone’s labour cost index (1300 UAE Time) and wage growth (1300 UAE Time) today. Analysts expect hourly labour costs in the Eurozone to increase by 3.2% year-over-year in the first quarter, which would be the smallest gain since the third quarter of 2022.
Wages in the Eurozone, which increased by 4.1% year-over-year in the fourth quarter, are expected to rise by 3.7% in the first quarter.
Other Markets: US trading indices closed lower on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 1.79%, 1.13% and 1.29%, respectively.
Iran rejected ceasefire talks, saying that it will not enter negotiations till it has responded to Israeli strikes. The news sent WTI prices higher by 1.34% this morning.
The Ukrainian military said that they had destroyed three Russian air defence systems. The news sent the safe-haven US dollar index higher in forex trading this morning.
China’s industrial production grew by 5.8% year-over-year in May, slowing from 6.1% in the previous month. The recent reading also missed market expectations of 5.9%, exerting pressure on the CNY/USD forex pair.
Uruguay’s GDP grew by 3.4% in the first quarter, slowing from 3.5% recorded in the previous quarter, which sent the UYU/USD pair lower in forex trading this morning.
New Zealand’s BusinessNZ Performance of Services Index declined to 44.0 in May from 48.1 in the previous month. However, the NZD/USD pair rose in forex trading this morning.
Italy’s inflation rate (1200 UAE Time, Germany’s 12-month Bubill auction (1330 UAE Time), Brazil’s IBC-BR economic activity (1600 UAE Time), Canada’s housing starts (1615 UAE Time), US NY Empire State manufacturing index (1630 UAE Time), 3-month Bill auction (1930 UAE Time), 6-month Bill auction (1930 UAE Time), NOPA Crush report (2000 UAE Time) and 20-year Bond auction (2100 UAE Time), as well as France’s 12-month BTF auction (1700 UAE Time), 3-month BTF auction (1700 UAE Time) and 6-month BTF auction (1700 UAE Time).
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