Tokyo stocks fall as Nintendo’s disappointing forecasts disappoint investors
Tokyo’s Nikkei 225 Loses 1.5%
Published in Tokyo, Japan
Asian shares showed a mixed performance on Wednesday in response to Wall Street’s relative stability, with Tokyo’s Nikkei 225 index experiencing a loss of 1.5% and closing at 38,244.76. Market investors were disappointed by Nintendo Co.’s forecasts, which caused a 5.2% decline in the company’s share price. Furthermore, Nintendo’s announcement of a successor to its popular Switch device by March 2025 also contributed to the decline in shares. This news has put the spotlight on authorities, examining their response to the persistent weakness of the yen against the US dollar.
Japanese officials expressed concern and hinted at the possibility of monetary policy responses after the yen’s decline to 160.25 against the greenback in recent days. Such fluctuations can greatly impact the economy and prices. While a weaker yen benefits Japanese companies with a significant portion of revenue from overseas operations, it poses challenges for households and businesses, reducing their purchasing power and increasing the cost of imports.
Other Asian Markets Follow Suit
Other Asian markets mirrored the decline, with Hong Kong’s Hang Seng index falling by 0.4% to reach 18,410.20. Similarly, The Shanghai Composite index in mainland China dropped by 0.4% and settled at 3,134.75. Australia’s S&P/ASX 200 held relatively stable at 7,795.70, while South Korea’s Kospi index slightly gained 0.1% to reach 2,736.20. Taiwan’s Taiex index increased by 0.1% as well.
Impacts of Recent Earnings Reports
Tuesday saw the S&P 500 edge 0.1% higher, reaching 5,187.70, following three consecutive significant gains of at least 0.9%. The Dow Jones Industrial Average also increased by 0.1% to close at 38,884.26. Meanwhile, the Nasdaq composite slipped by 0.1% to reach 16,332.56.
Quarterly earnings reports had notable impacts on specific companies. Kenvue, the parent company of well-known brands such as Band-Aids and Tylenol, saw its shares rise by 6.4% after exceeding analysts’ profit and revenue expectations. On the other hand, The Walt Disney Co. experienced a 9.5% decline, despite reporting stronger than expected quarterly results. Disney fell slightly short of revenue forecasts, and the company expects a softening of its entertainment streaming business in the current quarter.
In general, many companies have exceeded earnings forecasts for the first three months of the year. However, the stock prices of these companies have not experienced the usual post-earnings boost. In fact, companies that have fallen short of profit expectations have witnessed a more significant decline in stock prices the following day compared to historical trends. This could potentially indicate investor concerns about the overall valuation of the US stock market, which has reached record levels this year. For stock prices to continue rising, either profits must continue growing, or there would need to be a decrease in interest rates.
Possible Odds in Favor of the Stock Market
Last week, Federal Reserve Chair Jerome Powell’s comments suggested that the central bank is leaning towards cutting its main interest rate rather than hiking it, despite stubbornly high levels of inflation this year. Additionally, a cooler-than-expected jobs report on Friday heightened confidence that the US economy could strike a balance, avoiding a recession while keeping inflation from surging excessively.
Oil and Currency Market Movement
In the electronic trading market, US benchmark crude oil decreased by 33 cents to settle at $78.05 per barrel on the New York Mercantile Exchange. It closed with a loss of 10 cents on Tuesday at $78.38 per barrel. Additionally, the international standard, Brent crude oil, went down by 38 cents to reach $82.78 per barrel.
The yen, although weakening further against the US dollar, stood at 155.14 yen from the previous 154.50 yen. Such currency rate fluctuations continue to be of significant concern, with potential implications for the Japanese economy. Governor of the Bank of Japan, Kazuo Ueda, acknowledged this concern and expressed the possibility of responding with monetary policy adjustments.
The euro also experienced a decline, reaching $1.0742 from $1.0755.
Conclusion
The stock markets across Asia experienced mixed performance on Wednesday, with Tokyo’s Nikkei 225 falling by 1.5% amid disappointment caused by Nintendo’s forecasts and announcement of a successor to its popular Switch device. The weakening yen against the US dollar has become a focus of concern, with Japanese officials considering possible monetary policy responses. Overall, this period has seen a contrast in performances across Asian markets, with some showing slight gains while others facing losses.
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