Nikkei Under Pressure as Tech Stocks Weigh Down the Market Again

The Nikkei 225 index opened Monday’s (Oct 19) trading session under pressure, falling by approximately 2% and extending the losses seen after a sharp correction the previous week. Market sentiment remains clouded by a global sell-off in technology stocks, alongside growing concerns regarding the valuations and funding requirements of companies linked to artificial intelligence.

Pressure from Wall Street has also impacted Asian markets, following a prolonged sell-off in U.S. semiconductor stocks. Investors are becoming increasingly cautious toward technology firms with high valuations and significant debt levels—particularly given the prospect that global interest rates may remain elevated.

Conversely, a decline in oil prices and a drop in bond yields have provided some support to market sentiment. However, these factors have not been sufficient to offset the pressure from the technology sector, leading investors to continue reducing their exposure to risk assets at the start of the week.

The future trajectory of the Nikkei will be heavily influenced by the performance of global tech stocks, movements in bond yields, and expectations regarding U.S. monetary policy. As long as concerns surrounding the AI ​​and semiconductor sectors persist, the index is likely to remain volatile, with the potential for continued selling pressure.

Impact on Gold and the U.S. Dollar

For gold, pressure on equity markets may boost demand for "safe-haven" assets, which is generally positive for the precious metal—especially if U.S. Treasury yields continue to fall. Meanwhile, while the U.S. dollar might benefit from a "risk-off" sentiment, any further decline in U.S. yields could limit its gains. Consequently, current conditions appear to favor gold over the U.S. dollar. (CP)