Japanese Stock market Falls As US Healthcare Expectations Drop

Market sources believe that fading expectations for the policies of U.S. President Donald Trump are behind the 414.5-point plunge in the Nikkei 225 on March 22.

The sudden decline on March 22 was driven by a rising yen and a precipitous drop in U.S. share prices the previous day. The Dow Jones Industrial Average ended March 21 at 20,668.01 — 237.85 points down from the previous day’s close — as progress on the Republican Party’s replacement for the Affordable Care Act (Obamacare) looked increasingly fraught. Market worries also grew that Trump’s economic policies, including a major tax cut and infrastructure spending, would stall.

The U.S. uncertainty hit the Tokyo stocks of major exporters including automakers hard. Long-term interest rates also fell due to waning expectations for economic growth in Japan and the U.S., prompting worries of a negative impact on fund operations and a major drop in bank and insurance stock values. The foreign exchange market also reacted to the Dow Jones drop by buying yen and selling dollars, pushing up the value of the yen by 1.32 to 111.50 to the U.S. dollar by 5 p.m. on March 22.

However, Daiwa Securities Group Inc. Chief Strategist Hirokazu Kabeya points out that the Dow is still riding high above 20,000, so the March 21 drop was “within the range of our assumptions. No one thought that it would be smooth sailing for the Trump administration’s policies, so the stocks (pumped up by the ‘Trump effect’) simply came down to an appropriate speed.”

via Mainichi

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza