Nikkei 225 Plunges 3.85% to 64,024.6 on Tech Rout, June 08

Japan’s Nikkei 225 index fell 3.85% to close at 64,024.6 on June 8, losing 3,446 points in a sharp selloff driven by three forces: a global technology rout that started in the U.S., expectations of higher Federal Reserve interest rates, and military escalation between Iran and Israel. The decline mirrors weakness across Asia and reflects investor concerns about corporate earnings and rising energy costs.

Tech Stocks Lead the Selloff

Japanese semiconductor and artificial intelligence firms suffered heavy losses. Kioxia Holdings dropped nearly 10%, while SoftBank Group fell 8.63%. The weakness followed a late-week rout in U.S. technology markets, where the Nasdaq Composite fell 4.2% on Friday. Broadcom’s earnings guidance disappointed investors despite strong results, triggering profit-taking across the chip sector globally.

Fed Rate Hike Fears Weigh on Markets

Stronger-than-expected U.S. jobs data released last week stoked expectations of further Federal Reserve interest rate hikes. This shift in policy outlook dampened global risk appetite and boosted safe-haven demand for the U.S. dollar. Bank of America noted that a hawkish Bank of Japan rate hike could lift the yen, signaling markets are pricing in tighter monetary policy across major economies.

Oil Prices Surge Amid Middle East Tensions

Brent crude rose 3.7% to $96.26 a barrel as Iran and Israel traded military strikes over the weekend. The escalation raised concerns about energy supply disruptions and pushed up global inflation expectations. Higher oil prices threaten to increase Japanese corporate expenses and reduce consumer spending, weighing on economic growth.

Japan’s Economy Shows Strength, Raising Rate Hike Odds

Japan’s first-quarter GDP expanded 0.5% quarter-on-quarter, beating the median estimate of 0.3%. The annual growth rate reached 1.8%, above the expected 1.3%. This stronger-than-expected economic data raised market expectations that the Bank of Japan may hike interest rates, adding pressure to equities. The retreat from the year-to-date high of 68,670 yen signals a pullback after months of gains.

Final Thoughts

The Nikkei 225’s 3.85% drop reflects a perfect storm of profit-taking, rate hike fears, and geopolitical risk. With Meyka’s C+ grade and 12-month forecast of 49,931 yen, the index faces headwinds from higher borrowing costs and energy inflation.

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