Japanese stocks edged higher in early trade Monday as bargain hunting in chip-related shares provided modest support, though uncertainty over the Middle East conflict kept the Nikkei's gains limited to 0.1%.
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Nikkei edges up 0.1% as chip bargain hunting offsets Middle East risk
Japanese stocks edged higher in early trading Monday, with the Nikkei 225 adding 0.1% as investors scooped up chip-related shares on valuation dips while the unresolved Middle East conflict kept gains in check.
"The market is seeing selective buying in semiconductor names after recent weakness, but the geopolitical overhang from the Iran conflict is capping any sustained rally," said a Tokyo-based equity strategist at a Japanese brokerage, who asked not to be named discussing intraday flows.
Chip-related stocks led the advance, with semiconductor equipment makers and memory producers among the top gainers as traders hunted for bargains following recent declines. The broader Topix index moved in a narrow range, reflecting the tension between dip-buying appetite and risk-aversion driven by uncertainty over energy supply routes through the Strait of Hormuz.
The marginal move comes as cross-asset signals point to persistent stress. Japan's benchmark 10-year government bond yield extended its climb to 3.01% on Wednesday after reaching a three-decade milestone of 3% on Tuesday, while the yen traded at 158.81 per dollar, above the psychologically important 160 threshold. The dollar index rose 0.2% to 99.865, its highest since Aug. 17, as investors favored the greenback given the U.S. economy's comparatively lower exposure to energy shocks.
Markets are now pricing a 68% chance of a September Federal Reserve rate hike, up from roughly 40% a week earlier, according to CME Group's FedWatch tool. The yield on the benchmark U.S. 10-year note rose to as high as 4.8182%, its firmest since November 2023.
For Japanese equities, the key question remains whether the Middle East conflict escalates further, which would push oil prices higher and deepen the drag on an economy already contending with imported energy costs. Morgan Stanley commodity strategists have flagged that a prolonged closure of the Strait of Hormuz could push Brent toward $130-$150 per barrel, a scenario that would likely force further yen weakness and complicate Bank of Japan policy normalization.
This article is for informational purposes only and does not constitute investment advice.
