Tokyo stocks likely to be swayed by U.S. rate policy-linked events

Jiji Press TOKYO (Jiji Press) — Stocks are expected to move this week in response to events chiefly related to U.S. monetary policy, according to market sources.

Last week, the 225-issue Nikkei average jumped 470.46 points, or 2.21 percent, to end at 21,746.38.

The rise came as concerns over an escalation of the U.S.-China trade conflict eased after U.S. President Donald Trump and his Chinese counterpart, Xi Jinping, agreed in a meeting on Saturday to restart bilateral trade talks. They met on the sidelines of the Group of 20 summit in Osaka.

This week, the Nikkei is expected to move mainly between 21,500 and 22,000, analysts and brokers said.

After the U.S. Labor Department’s release of its employment report for June on Friday, participants in the Tokyo market would react on Monday to the extent of a rise in nonfarm payrolls shown by the report, a key data examined by the U.S. Federal Reserve in steering monetary policy, brokers and analysts said.

If the payroll increase matches or deviates little from the market consensus of around 160,000, investors will move to buy in anticipation for an interest rate cut by the U.S. central bank at a policy-setting meeting later this month, they predicted.

“But if the headline figure is larger than that, the rate cut expectations will recede to dampen stocks,” said Yutaka Miura, senior technical analyst at Mizuho Securities Co.

Yoshihiko Tabei, chief analyst at Naito Securities Co., warned of the possibility of the Nikkei going down to 21,500.

Investors are also focusing on Fed Chairman Jerome Powell’s congressional testimonies this week, at the House of Representatives on Wednesday and at the Senate the following day. “The Nikkei may rise up to 22,000 if Powell hints at a rate cut possibility,” said Hiroaki Hiwada, strategist at Toyo Securities Co.

Meanwhile, Tomoaki Fujii, head of the investment research division at Akatsuki Securities Inc., said the market “may struggle for direction” after rising or dropping in response to the U.S. jobs report.Speech

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