Japan's Nikkei recovers from 6.4% drop on tech earnings focus
Japanese equities bounced back from their steepest weekly selloff in over a year, though the rally's durability hinges on upcoming earnings from U.S. tech giants.
The Nikkei 225 climbed 1.25 per cent to 64,945.96 in early Tuesday trading, while the broader Topix gained 1.33 per cent to 3,971.20. The advance marked a partial recovery from the benchmark's 6.4 per cent plunge last week, its steepest weekly selloff in more than a year.
Japanese markets were closed on Monday, temporarily shielding local equities from a modest retreat on Wall Street. That U.S. decline was driven by an escalation in the U.S.-Iran conflict, which pushed oil prices higher and injected uncertainty into global markets. Upon reopening, investors moved to capitalize on discounted valuations, resulting in overwhelmingly positive breadth with 196 of the Nikkei's 225 components trading higher.
Beneath the surface of the broad-based rally, the price action signaled that investors remain highly selective. Chipmaker Kioxia Holdings led the index with a 5.89 per cent surge, and heavy machinery maker IHI gained 4.14 per cent. Cosmetics giant Shiseido also featured among the top performers, rising 5.78 per cent.
On the losing side, tech-adjacent names lagged. Video game maker Nintendo dropped 3.91 per cent to lead the decliners, while tech-industry supplier Sumco fell 3.45 per cent and Nikon lost 2.18 per cent. This split suggests the rebound is a targeted repositioning rather than a wholesale return to risk-on sentiment.
The market's near-term trajectory is now tightly coupled to the performance of the global technology sector. Investor focus has shifted to second-quarter earnings due later this week from U.S. AI bellwethers, notably Alphabet, Tesla and Intel. The results from these American giants will effectively set the valuation benchmark for their Japanese peers.
Strategists caution that Tuesday's move lacks the conviction of a sustained bottom. "Compared to the sharp fall we saw in the latter half of last week, this technical rebound does not yet appear to have very strong momentum," said Wataru Akiyama, an equities strategist at Nomura Securities. "Upcoming earnings announcements in Japan and the U.S., particularly those from major names, are likely to resolve some of this weakness in AI-related shares."
