Stock Market Outlook
2022-11-14
■ 【European Stock Market】In terms of performance the stock market began to rapidly move down
■ 【Japan Stock Market】The rise of the stock price will become heavier with the passage of time
European stocks will rally sharply in September. The tense developments continue against the backdrop of speculation surrounding the UK government's announcement of massive tax cuts and plans for a government bond issue. Following the minutes of the European Central Bank (ECB) Governing Council meeting (September 7 and 8), the market believes the pace of interest rate hikes will remain low as market fears of a recession intensify. Investors' risk appetite improved after the announcement of the resignation of British Prime Minister Alexis Tlas, and rose at the end of last year. The European Central Bank (ECB) Governing Council decided to raise interest rates by 75 basis points, but the subsequent rise in stock prices hinted at a slower pace of future rate hikes. However, there is a huge divergence of views within the ECB, which puts a question mark on the sustainability of the stock market as it slows down the pace of monetary tightening. We will maintain our slightly pessimistic view on European equities as the market appears to be rapidly starting to lower earnings per share forecasts for companies in the Euro 600.
Japanese stocks rebounded sharply in October. Nerves turned nerve-wracking as speculation about the pace of monetary tightening in the U.S. intertwined. Domestic stocks strengthened on expectations of inbound spending and the Nikkei average closed lower, but gains in the 200-day moving average (near ￥27,200-7,300) were tempered by the re-emergence of a new pneumonia infection in China. Although the index has surpassed that level at the end of the year, the upward momentum has not strengthened. China's zero-infection policy is expected to stick, spending by Chinese tourists is expected to increase, and anxiety about economic policy will persist among Japan's new leaders, which will add a heavy burden to Japanese stocks. The market profit outlook is likely to be supported going forward due to a weaker yen, improved profits in major manufacturing industries, and increased inbound consumption. However, EPS for the next fiscal year is expected to increase over time mainly through downward revisions and stock price increases.