The Japan stock market sent a clear signal to Western investors on Christmas Eve and it was certainly not optimistic at all. With one of the biggest drops that have occurred in recent years and that will undoubtedly end up affecting the stock markets of the old continent and of course also the Spanish. In a downward spiral which is unprecedented in recent months and even trading exercises. It is as if to fear the worst, point out some of the investors with more experience in the markets.
This decline in Japanese equities was preceded by another sharp drop on Wall Street. Where the words of the top leader of the United States Federal Reserve (fed) have not been very well received by the different financial agents regarding the monetary policy to be carried out on the other side of the Atlantic. Even President Donald Trump himself has had to intervene in the face of the turn events are taking on these special days.
In any case, there is one thing for sure that small and medium investors already know and that this year they will not have the expected christmas party rally. A good rally, yes, but with a marked downward trend, with an intensity rarely seen in recent months. To the point that most of the international stock exchanges are going to end the month of December with losses close to 10% and in some stock markets even with more intensity. In other words, an unflattering outlook for the powerful stock market investment sector.
The Japan Stock Exchange gives the notice
The Nikkei, an index that includes the 225 most representative titles in the Japanese market, has made this move Monday slightly more than 5%. To the point that it has gone to 19.155,74 points. Breaking the important and psychological level of 20.000 points and in any case it is at its lowest level since April 25 of last year. Although worst of all is that the Japanese stock index has entered a more than dangerous bearish race that does not know how far it will take in the coming months or even years.
From this general scenario focused on the far east, It is known at least that this tremendous setback in a single day is the most pronounced since November 9, 2016. The date on which the United States elections were taking place and that led Trump to occupy the presidency of his country. But the most important thing is the domino effect that this drop in Japanese equities can generate in other markets closer to Spanish. In a year that is about to end and from which absolutely nothing can be expected.
It will affect the European stock markets
In turn, the Topix, broader than the Nikkei 225 and which includes two thousand firms with the largest market capitalization, lost 4,88%. That is to say, almost 75 points, which indicates the extreme gravity of these movements in the financial markets. In a way, not expected due to its special intensity and virulence in the falls experienced at the beginning of the Christmas holidays. Now we will have to wait for the response of the European equity markets, although nothing good is expected. Not much less.
It should be noted that in the European stock markets the year is almost over. There are only two trading sessions left, today Thursday and tomorrow. Because on the last day of the year, it is true that the western stock markets will open their doors, but in the middle of the session, as happened on Christmas Eve. Although in any case, small and medium investors fear the worst, with a rout by all investors who will prefer to stay in a situation of absolute liquidity. Despite the somewhat contradictory advice that some financial intermediaries are launching.
Reasons for this reaction
Analysts attributed today's setback in Tokyo to those same tensions, still latent, and to new attacks by the US president, Donald Trump, against the chairman of the Federal Reserve (Fed), Jerome Powell. But everything seems that the causes are even deeper and everything seems to indicate that a recessive scenario is being discounted in the international economies for the next few years. Beyond other technical considerations and even maybe from the fundamentals of the stock market values.
In any case, there is a sure one and that is that growth in the main international economies it's going to be lower than the one developed during which there are only a few days left to pass to a better life. Because in effect, the reviews that all international organizations have been pointing to go in this direction. With downward revisions to economic forecasts starting this year. Although at the moment without pointing to a particularly large economic crisis, although there are really very worrying signs.
The Japanese economy is doing well
This reaction of the Japanese equity markets is not in line with the statements of the Japanese Prime Minister Abe. It refers to the fact that the health of the Asian economy is excellent and that all economic parameters are under control. So why the Japanese stock market has experienced this drop in the price of the securities listed on the financial markets? The causes can be found in exogenous rather than endogenous factors, where the rate hike by the United States Federal Reserve has a lot to do with it. Especially in a globalized world like today.
Therefore, the stock market in this country is picking up a new scenario in monetary policy that can also affect its own economy. Hence, investors in this geographical area have decided that it is the definitive time to collect benefits and stay in liquidity in the face of what may happen from now on. Especially since the technical aspect of its main stock indices has deteriorated in recent hours.
Levels at 20.000 points
Nor is it insensitive to the fact that the Nikkei has broken the relevant support it had at 20.000 points. This fact can cause a continuation in the falls and up to a level hitherto unknown. In this sense, it cannot be forgotten that this financial market has experienced significant uploads since 2013 and it is logical that there are strong corrections to adapt to the law of supply and demand. In any case, the worst of all is based on the fact that it has broken the bullish guideline in the short and medium term that it had until just a few days ago.
This in practice means that we are going to have to get used to seeing falls in this financial market of special international relevance. Although the operations carried out by small and medium investors are rather minimal, despite the fact that there was a time when their technical aspect invited to take positions in any investment profile. Now there is no doubt that it will be necessary to rethink this strategy and opt for new models to make the available capital profitable.
Trade war between the powers
Beyond other technical considerations, there is no doubt that the possible trade war between United States and China it may encourage declines in the Japanese stock market to intensify in the coming weeks. Not surprisingly, it is one of the financial markets most exposed to this scenario that arises as a consequence of this commercial conflict. To the point that its stock market can be much more damaged than that of Western countries and specifically those of the old continent.
Therefore, the caution It should be the common denominator of your actions in the equities of the Asian powerhouse. Right now, there is much more you can lose than gain. It is not a place to which you should direct your savings since the risks are significantly higher and it is not worth making purchase movements in this financial market. In particular, after having broken the important levels that it had at 20.000 points, as we have commented previously.
In any case, it will be necessary to pay special attention to its behavior in the first days of the new year that is about to reach all investors. They can give some other signal about the movements that this bag can take so far from ours. Although the forecasts are not at all favorable for a positive resolution on further rises in the Japanese stock market. In this sense, the most advisable thing is to be out of this relevant financial market, even if there are strong rebounds in the valuation of the shares of Japanese companies. So that in this way, savings can be more effectively protected, which is ultimately what it is all about.