Nikkei retreats from morning high as Nasdaq futures soften ahead of Micron results

The shift in Nasdaq futures underscores the strong link between Japanese stocks and US chip-market sentiment, making Micron's Wednesday results the key near-term driver. A Reuters-cited analyst forecasts that the US semiconductor index will remain within a broad range over the next three to four months, with the Nikkei expected to follow that pattern. This suggests volatile back-and-forth trading rather than a clear upward move in the near term. The analyst also highlighted a longer-term warning for bank stocks, which may lose their backing when the BOJ's policy rate nears its terminal level.

Earlier in Japan:

• Japanese services producer prices jumped 3.7% in August, marking the quickest pace in more than two years.
• Bank of Japan minutes revealed dissenting views on speeding up rate increases as price risks tilt upward.

The Nikkei's early-session advance dissipated as participants stepped back before Micron's results, while analysts predicted a market stuck in a range.

Key takeaways:

• The Nikkei closed the morning session marginally lower on Monday, having earlier climbed up to 1%, as per Reuters.
• The index stands to break a five-session winning streak if the current softness persists, while the Topix edged roughly 0.2% higher.
• According to a Reuters-cited portfolio manager, investors offloaded stocks as Nasdaq futures declined during Asian hours, with Micron Technology set to announce its quarterly numbers on Wednesday.
• Additional selling was tied to half-year-end portfolio rebalancing, the manager added.
• The US semiconductor index is expected by analysts to remain within a broad range for the coming three to four months, with the Nikkei likely mimicking that trajectory.
• Technology and bank shares are anticipated to be the primary pillars of support for Japanese equities, but bank stocks could weaken once the BOJ's policy rate gets closer to its terminal point.

Reuters reported that the Nikkei gave up its morning advance and edged lower on Monday, pressured by a dip in Nasdaq futures and wariness before Micron Technology's results.

The benchmark ended the morning session fractionally lower after a 1% rise earlier. Should the weaker mood persist until the close, the Nikkei will snap a five-day winning run. In contrast, the Topix inched up about 0.2%.

A senior portfolio manager at a Japanese asset manager told Reuters that share sales occurred as Nasdaq futures softened in Asia, ahead of Micron's Wednesday earnings. He also said that some selling was for half-year position rebalancing.

Beyond the immediate earnings catalyst, the portfolio manager said the US semiconductor index has traded in a box pattern since June 20. He described the range as quite broad and expects it to hold for the next three to four months, with the Nikkei expected to mirror that movement. Technology and bank stocks will stay the two key supports for Japanese shares, he believes. However, he warned that bank shares could falter when the BOJ's policy rate moves nearer to its terminal level.

These remarks highlight the heavy reliance of Japan's market on US chip stocks and on the influence of Micron's report on sentiment. Market participants will scan the results for clues on whether the chip rally can drive the Nikkei back to its recent peaks, or if the range-trading scenario the analyst outlined will persist.