Nikkei 225 Index Drifts lower, G20 Caution In Evidence

The Nikkei 225 index was unable to make any headway on Friday with a subdued dollar and US profit taking curbing support as uncertainty surrounding G20 meetings were also a significant factor.

US equity markets were hit by profit taking following strong gains after the Wednesday’s Federal Reserve statement with the S&P 500 index declining 0.16% on the day.

Energy prices were little changed on the day which did not provide a clear lead for the Japanese market. Asian equities were mixed on the day with a decline of just over 1.0% in the Shanghai index on concerns surrounding higher money-market rates having a negative impact on Japanese stocks.

In comments on Thursday, US Treasury Secretary Mnuchin repeated comments that a strong dollar was beneficial over the longer term, but that there were ‘certain issues’ on a shorter-term basis. The rhetoric offered some reassurance over the US stance at the G20 meetings which start on Friday, but there was still an important element of uncertainty which curbed potential buying support for equities.

USD/JPY found further support on approach to the 113.00 area, but was unable to gain any fresh traction with markets still assessing Wednesday’s Federal Reserve policy statement and the longer-term policy implications.

The Nikkei index opened slightly lower, but there was support below the 19,500 level and equities edged higher into the break, without moving into positive territory. Narrow ranges dominated during the afternoon session with a limited rally in late trading.

At the close, there was a decline of 68.55 points and 0.35% at 19,521.59. For the week as a whole, there was a decline of just under 0.50%.

The G20 meetings will be monitored closely on Friday and Saturday for further evidence on trade and currency policies which could have an important impact at Monday’s market open. Dollar trends will also continue to be key focus in the short term.

Nikkei 225 Index Daily Chart

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Tim is a contributing author to EconomicCalendar.com. He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.