Key Points
- Nikkei 225 dropped 3.47% to 49,380.65, extending losses from Tuesday’s record highs.
- SoftBank Group plunged 10% as tech shares mirrored a 2% Nasdaq drop overnight.
- Caution grew after Wall Street CEOs warned that valuations may be “unsustainable”.
- USD/JPY eased to 153.16, while Brent crude slipped 0.6% to $64.05.
Asian markets were deep in the red on Wednesday as traders fled risk assets following a sharp tech-led selloff on Wall Street. Japan’s Nikkei 225 tumbled 3.47% to 49,380.65, retreating nearly 7% from Tuesday’s record highs, while South Korea’s KOSPI index dropped 6.2% amid heavy selling in chipmakers and AI-linked stocks.
The rout was triggered by renewed concerns over equity valuations after senior Wall Street figures, including the CEOs of Morgan Stanley, Goldman Sachs, and JPMorgan Chase, warned that the market’s rapid ascent may be difficult to sustain.
“It’s a sea of red across broad markets,” said Chris Weston of Pepperstone, noting that traders appear reluctant to buy the dip before Nvidia’s earnings on 19 November.
Broader Market Moves
The MSCI Asia ex-Japan Index fell 2.3%, marking its worst day since early April when the U.S. tariff escalation jolted markets. SoftBank Group slid 10%, while other tech-heavy names followed the overnight Nasdaq Composite decline of nearly 2%.
In currency markets, the U.S. dollar eased 0.3% to 153.16 yen following the release of dovish Bank of Japan minutes. The Dollar Index (USDX) retreated after briefly touching a five-month high at 100.25.
Meanwhile, Bitcoin dipped below $100,000 for the first time since June before rebounding modestly, and gold recovered 0.2% to $3,938.54 per ounce after three sessions of losses.
Technical Analysis
The Nikkei 225 plunged about 3.5 % to 49,380.65, erasing a portion of its recent gains and falling back below the psychological 50,000 mark. The sharp move comes after a sustained rally and now raises red flags for the short-term trend.
On the technical side, the decline broke through recent support levels and pushed below the short-term moving averages, with the MACD histogram widening on the downside—signalling increased negative momentum.
From a fundamental viewpoint, the drop is tied to broad-based tech sell-offs in Asia following warnings from major U.S. banks about “stretched valuations,” especially in the semiconductor and AI sectors.
In Japan, exporters were hit doubly by the tech slump and by a stronger yen and more cautious global demand backdrop, undermining the bullish momentum that had driven the Nikkei higher.
Looking ahead, the key things to watch: if the index can hold above the next support near 48,000, there may be a rebound attempt; but if it breaks decisively below that level, a deeper correction toward 46,000–45,000 could be on the cards.
Conversely, for a turnaround, the Nikkei would need a strong close back above 50,000 and a tightening of the MACD spread — ideally driven by fresh catalyst headlines such as improved earnings or positive trade news.
Outlook
The index remains vulnerable as traders weigh stretched valuations against robust earnings fundamentals. With volatility at its highest since April, traders may adopt a more defensive stance ahead of Nvidia’s earnings and upcoming U.S. inflation data.
Short-term sentiment stays cautious, but longer-term fundamentals — including corporate profit growth and a weak yen — could help stabilise Japanese equities once the current correction runs its course.
