Market sources said Friday that the direction of the Tokyo stock market will likely be determined by the outcome of the U.S. Federal ReserveFederal Reserve's policy-setting meeting.
The Nikkei average of 225 selected issues listed on the Tokyo Stock Exchange's Prime section plunged 810.18 points, or 2.88%, to 27,333 last week. The market suffered losses due to a risk-averse mood sparked by the March 10 collapse of Silicon Valley Bank and worsened by rekindled financial woes at Swiss financial giant Credit Swiss.
A series of response measures helped relieve fears of bank failures to some extent by Friday, helping the Tokyo market to start a rebound on the day.
The average Nikkei is expected to move between 26,800 and 27,800 this week, analysts and brokers said. The Tokyo market will be closed Tuesday for a national holiday.
Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co. said that stocks are unlikely to show wild swings early in the week due to a wait-and-see mood ahead of the Fed's two-day Federal Open Market Committee meeting through Wednesday and Fed Chairman Jerome Powell's press conference after the meeting.
On the other hand, Ichikawa stated that the possibility of a sell-off cannot be ruled out as fears of a banking crisis still remain, suggesting that news of another bank failure or financial issues at banks would trigger hefty selling.
Unless concerns about the health of the banking system are reignited, the Tokyo market is expected to extend gains gradually despite profit-taking, according to Ryuta Otsuka, strategist at the investment information department of Toyo Securities Co.
If the Nikkei rises to around 27,500, the selling to lock in profits will cause a lot of steam, he said.