Nikkei Weekly Outlook: Eyes on I-banks, Inflation, Yen


The Nikkei had a rough go last week indeed, losing 3.6% and the 14,000-level (13,973.73); TOPIX fell to 1,371.57 after a short-lived recovery of 1,400 two weeks ago. No worries though, as Chicago Nikkei 225 futures not only held 14k, but added 140 points to the upside (14,220) setting the stage for a gap up on Monday (Osaka N225 futures: 13,980). The Bank of Japan held its benchmark rate at 0.5%, as expected; meanwhile, the yen has eased to its weakest level against the dollar, ¥108/$1, since late February.

Inflation and U.S. i-bank earnings will weigh heavy on sentiment this week. Lehman [[LEH]] leads off on Monday, 6/16, Goldman [[GS]] is up on Tuesday, 6/17 and Morgan [[MS]] reports on Wednesday, 6/18. Circuit City [[CC]] is scheduled to announce earnings on Thursday, 6/19, which could impact consumer electronics stocks.

Back to Japan, the 25 DMA of Topix-1 advancers/decliners slipped to 97.2%, from its recent string of 110-120-level readings. Decliners outpaced advancers over 2:1 on Friday and 54 stocks hit new lows vs. 14 hitting new highs. The emerging MOTHERS and HERCULES markets are displaying particularly bearish readings in the 70-75%-range, perhaps having something to do with those i-banks bailing on them.

As of Friday’s close the N225 is trading at 16.3x trailing and 16.6x forward earnings, 1.64x book, 1.49% trailing yield and 1.57% forward yield. By comparison, TOPIX (1st Section) is trading at 17.5x trailing and 16.8x forward earnings, 1.51x book and 1.69% trailing yield and 1.74% forward yield.

Nikkei 225 Chart June 13 2008