富国生命投資顧問株式会社

Report

Japanese Equity Market

Overview in October 2019

Nikkei225TOPIX

The stock market in October rose by 5.38% in the Nikkei Stock Average due to progress in US-China trade talks and expectations for bottoming out of corporate performance.

The stock market began to decline in response to reports that US economic indicators were weak and that the US was considering limiting investment in securities for Chinese companies. After that, the stock market started to rise due to the postponement of tariff increases planned due to progress in US-China trade talks, which eased concerns about a slowdown in the global economy.

In late October, in addition to the weak yen and the strong dollar, the guidance for the October-December period announced by a major US semiconductor manufacturer exceeded market expectations. Nikkei Stock Average rose for the seventh consecutive day as expectations for bottoming out increased. Toward the end of the month, the stock market remained firm due to factors such as the Bank of Japan's continued monetary easing, although there was a rebound after the rise.

In terms of performance by industry, all industries such as metal products, shipping, and pharmaceuticals rose, except for textiles.

Outlook for November 2019

Stock prices are on an upward trend, due to the loose monetary policy of the Federal Reserve and the expectation of bottoming out of the global economy as the US-China trade talks progress. On the other hand, the severity has been increasing, such as downward revisions to full-year results, mainly for companies related to external demand, and the room for higher prices is limited and movements in the box are expected.

Due to factors such as a decline in world trade volume due to the US-China trade war and stagnant production activities in the manufacturing industry, the IMF (International Monetary Fund) has revised its forecasts of the global economy outlook for 2019 down to 3.0% (from 3.2% in July) and as for 2020 to 3.4% (from 3.5% in July). The growth rate in 2019 is the lowest after the global financial crisis, and has been lowered in major countries such as the United States, Eurozone and China. As the economy slows down, the future of US-China trade talks is drawing attention. Future trade negotiations between US and China leaders will be important in predicting the future of the global economy.

Regarding the financial results for the July-September period, which continues to be announced, some domestic demand related sectors such as information services and real estate have been solid. On the other hand, in the sector related to external demand, such as machinery, chemicals, and transportation equipment, there are a number of companies that have revised their full-year performance plans downward due to the severe effects of the slowdown in the Chinese economy. Although the semiconductor market is showing signs of bottoming out, the overall outlook for external demand remains uncertain.

Under these circumstances, the Nikkei Stock Average has been on a rising trend, such as a year-on-year high. With the progress of US-China trade negotiations in the future, corporate performance may bottom out. However, because the current situation seems to be difficult to make a full recovery next year, there is limited room for the stock market to rise, and movement in the box area is expected.