Japan's Nikkei 225 index rose by 1.25% to 64,945.96 in early trading on Tuesday, recovering part of last week's 6.4% decline. The broader Topix index also gained 1.33% to 3,971.20, as investors engaged in bargain buying despite global market caution due to rising oil prices and geopolitical tensions.
The rebound in Japanese stocks occurred even as Wall Street ended slightly lower on Monday. The ongoing U.S.-Iran conflict has pushed oil prices higher, sparking concerns over inflation and economic growth. Despite these challenges, market participants are now focusing on the upcoming second-quarter earnings season, with major U.S. technology companies like Alphabet, Tesla, and Intel set to report results later this week.
Analysts have attributed Tuesday's gains to a technical rebound following last week's sharp selloff. However, caution remains as investors await key corporate earnings reports from both Japan and the United States. Market breadth was positive, with 196 of the Nikkei's 225 constituents trading higher, while only 28 stocks declined.
Among the top gainers, chipmaker Kioxia Holdings surged 5.89%, followed by cosmetics company Shiseido, which rose 5.78%, and heavy machinery manufacturer IHI, up 4.14%. On the downside, Nintendo was the biggest laggard, falling 3.91%. Tech materials supplier Sumco declined 3.45%, while camera maker Nikon slipped 2.18%.
The market's focus on earnings season is crucial as investors seek updates to gauge the outlook for artificial intelligence-related stocks, which have been under pressure in recent sessions. The performance of these stocks could significantly impact market sentiment in the coming weeks.
Background
The Nikkei 225's recent performance comes after a significant selloff last week, driven by global economic uncertainties and geopolitical tensions. The index's recovery is seen as a technical rebound, with investors cautiously optimistic about the upcoming earnings season, which is expected to provide insights into the health of key sectors.
Looking ahead, investors will closely monitor the earnings announcements from major technology companies, as these results will provide insights into the health of the tech sector and its influence on global markets. The outcome of these reports could set the tone for market movements in the near term.
