Nikkei 225 recovers to 70,000 and retreats in the latter half of the week; nervousness over oil supply and demand and the start of the full-scale earnings season
1. Weekly Market Overview: A ‘week of tug-of-war’ that saw a temporary recovery to 70,000 followed by profit-taking
The stock market for the second week of October 2026 (October 5-9) started with extremely strong buying from the beginning of the week, welcomed by the retreat of additional rate hike expectations following the softening of U.S. employment statistics at the end of the previous week, and a pause in the rise of oil prices following the coordinated release of oil reserves by the G7 (Group of Seven).
The Nikkei Stock Average temporarily recovered to the 70,000 yen level at closing for the first time in about three months, and there were moments during trading hours when it exceeded the all-time high on a closing basis. In the U.S. market as well, the tech-heavy Nasdaq Composite Index hit record highs for consecutive days, and the S&P 500 index also broke its record high, strengthening the global stock price uptrend.
However, the market atmosphere changed completely as the week entered its latter half. Amid lingering uncertainty over geopolitical risks surrounding the Middle East situation, profit-taking selling expanded in AI and semiconductor-related stocks that had surged recently. Furthermore, the news that OpenAI’s annualized revenue fell short of market expectations was taken negatively, throwing cold water on tech stocks in general.
The Nikkei Stock Average’s ‘time spent at the 70,000 yen level’ was short, and it was pushed down by selling toward the weekend. However, the deep-seated bullish sentiment toward Japanese stocks and expectations for the April-September corporate earnings season, which will begin in earnest from next week, supported the downside, and the market ended the week maintaining a ‘fourth consecutive weekly gain’ despite the limited decline.
2. Weekly Movements in Japanese, U.S., and Global Markets and the Macro Environment
Examining the rate of change in major asset prices this week (trends from Monday to Thursday), extremely dynamic disparities emerged by asset class and region.
[Bright and Dark Sides of Global Assets] Brazil surges, Bitcoin plummets, and oil shows nervous movement
Among the movements in asset prices this week, the following three points were particularly notable.
First is the surge in the Brazilian stock market (Bovespa Index). In Brazil, the first round of the presidential election concluded, and when it was reported that pro-business candidate Bolsonaro had gained the lead, intense buying flowed into the stock market. Although Brazil currently has a high policy interest rate, inflation has shown signs of settling and is within the central bank’s target range. In addition to expectations for pro-business policies, the view that there is now ‘room for rate cuts’ from high interest rates has strengthened, leading to outstanding capital inflows among emerging markets.
Second is the decline in crypto assets (Bitcoin). While the stock market showed resilience, Bitcoin was forced into a sluggish trend. The biggest factor for this is the ‘rise in real interest rates’ in the United States. For Bitcoin, a non-interest-bearing asset that does not generate dividends or yields, the high level of real interest rates became a strong headwind, leading to capital outflows.
Third is the nervous tug-of-war in the oil market. WTI crude oil futures prices rose slightly over the week. In addition to the fact that geopolitical risks in Yemen and around Saudi Arabia remain unsettled, supply concerns were fueled by the precautionary temporary suspension of oil production facilities in the U.S. due to a hurricane approaching the Gulf of Mexico.
However, the oil market has a mix of both strong and weak factors, and the scenario of price stabilization due to increased supply is dominant in the medium to long term. As a weak factor (price decline factor), the G7 decided on October 2 to coordinate the release of crude oil and diesel reserves, which eased immediate supply and demand concerns. Furthermore, the latest oil production forecast released by the U.S. Energy Information Administration (EIA) on October 6 showed that oil production will increase in the future not only in OPEC countries but globally. After digesting sudden geopolitical noise, it is considered highly likely that oil prices will gradually return to a downward trend.
[Japanese and U.S. Stock Markets] Recovery of the NT ratio and conditions for breaking through the 70,000 yen level
In the Japanese market this week, the Nikkei Stock Average temporarily reached the 70,000 yen level but could not hold it. However, clear positive signs can be seen in the internal structure of the market.
The symbol of this is the trend of the ‘NT ratio (Nikkei Stock Average / TOPIX)’. Currently, the NT ratio has turned to a gradual recovery (rise). An increase in the NT ratio means that funds are returning to high-index-contribution tech and growth stocks. In phases where funds flow into tech stocks, the market’s overall expectations (PER = Price Earnings Ratio) tend to rise. Although the expected PER of the TOPIX had temporarily declined, if the rise in tech stocks is accompanied by an expansion of the PER (re-evaluation of valuation) in the future, a bullish scenario where the Nikkei Stock Average aims for a higher level, rather than just recovering to 70,000, becomes realistic.
[European Political Risk] France’s budget proposal and the widening of government bond spreads
This week, what drew caution in the European market was the ‘French situation’. It became unclear whether the new fiscal year’s budget proposal would be smoothly passed by the parliament in France, and French long-term interest rates surged. As the yield spread between French and German 10-year government bonds widened, the relative performance of French stocks against European stocks (STOXX Europe 600 Index) deteriorated significantly. However, the current decline remains limited to France-specific political risks and has not led to movements that would spread to Europe as a whole or to a global financial system crisis.
3. Major Market-Moving Factors and Notable Individual Stocks
This week, the market was enlivened by a highly diverse range of material-driven stocks, including a semiconductor giant that broke through the 30 trillion yen market capitalization threshold, a rise in security stocks against the backdrop of successive cyberattacks, progress in EV strategies, and small-to-mid-cap stocks that announced strong earnings.
① The Protagonists of the Semiconductor/AI Market: Advantest’s 30 Trillion Yen Breakthrough and Rorze’s Limit-High
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Advantest: It powerfully updated its “all-time high” for consecutive days after accounting for the stock split. Following the news that its largest supplier of semiconductor test equipment, U.S.-based Nvidia, hit all-time highs for consecutive days, intense buying flowed back into the stock as a core AI semiconductor play. As a result, the company’s market capitalization finally surpassed the “30 trillion yen threshold”, cementing its presence as a leading global Japanese giant.
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Rorze: Rorze, which handles semiconductor wafer transfer equipment, was bought up to its daily limit. The direct trigger was the announcement of an upward revision to its earnings forecast and year-end dividend forecast for the current fiscal year (ending February 2027). With the global expansion of AI investment acting as a tailwind, it was proven that orders for semiconductor manufacturing equipment are growing strongly, making it a driving force for small-to-mid-cap semiconductor stocks.
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Taiyo Yuden: Based on the agreement for joint development of next-generation electronic components with TDK announced at the end of September, the stock maintained a strong upward trend this week, following last week. Major securities firms have raised their target prices for the company, and the mutually complementary relationship that brings together the strengths of both companies is expected to boost mid-to-long-term earnings.
② “Cybersecurity-Related” Stocks Surge Amid Daily Reports of Unauthorized Access
Cybersecurity-related stocks saw across-the-board surges in the sector. In Japan, since July, there has been an increasing trend of large-scale information leakage incidents caused by unauthorized access targeting major corporations and government agencies. With news of unauthorized access to corporate systems and personal information leaks appearing almost daily even into October, speculation regarding the expansion of corporate security investment has intensified further. Real demand buying and thematic buying, anticipating earnings growth, concentrated on security-related companies such as Trend Micro.
③ Aiming for EV Popularization Through Price Destruction: Suzuki’s New Compact EV “e-Sky”
On October 6, Suzuki officially announced that it would launch its first compact passenger EV (electric vehicle), the “e-Sky,” on November 16. What the market focused on most was its pricing. The base vehicle price was set at “from 2.12 million yen,” hitting the lowest price in Japan for a compact passenger EV. By utilizing national and local government subsidies, it will be possible to purchase the vehicle for effectively in the mid-1 million yen range, and buying interest in the company’s stock was triggered by expectations that this would suddenly stimulate demand in the domestic EV market, where high prices have been a bottleneck until now.
④ Stocks That Surged on Earnings Surprises: Sankyo Tateyama
Major housing aluminum sash manufacturer Sankyo Tateyama was bought up to its daily limit. It was a surprise that in its consolidated financial results for the June-August period, the final profit and loss turned dramatically to a surplus of 1.5 billion yen. In addition to the progress in raising product sales prices (price pass-through) in conjunction with the rise in aluminum bullion prices, the strong recovery in sales volume, centered on automotive components, brought about a rapid expansion in earnings.
⑤ “Department Store Sector” Bounces Back from Heatwave and Bad Weather
The same-store sales of department stores for September, announced at the beginning of October, showed a generally solid trend. Although nationwide bad weather and lingering summer heat continued in September, the movement of autumn clothing was strong as temperatures dropped. The “wealth effect” against the backdrop of high stock prices is strongly supporting the robust consumption of high-end goods by the wealthy, and inbound consumption by foreign visitors to Japan is also progressing at a pace exceeding the market’s prior expectations. As evidence of the resilience of domestic consumption, stable funds flowed into department store stocks.
4. Important Events and Notable Indicators for Next Week (3rd Week of October)
Next week, market interest will shift rapidly from macro to micro (corporate performance) with the opening of major high-tech trade fairs, the publication of price indicators in the U.S. and China, and the start of the April-June (July-September) earnings season for U.S. companies.
[Main Schedule for Next Week]
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October 13 (Tue): CEATEC 2026 opens, IMF (International Monetary Fund) World Economic Outlook released, and July-September earnings for major U.S. companies begin.
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October 14 (Wed): China and U.S. September Consumer Price Index (CPI) released.
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October 15 (Thu): U.S. September retail sales released.
Key Point 1: US September CPI (to be released Oct 14) and the “Expectation of a Pause in October Rate Hikes”
The biggest focus is the US September CPI to be released on Wednesday the 14th. Following the Fed’s resumption of rate hikes, the market was briefly concerned that “they might push for consecutive rate hikes at the October meeting as well.” However, given the recent softening of economic indicators, the probability of consecutive rate hikes in October is currently seen as extremely low.
Even so, checking the CPI data is essential. Of particular note is the growth in the “core CPI,” which excludes energy and food. The previous month’s core CPI was +2.4% month-on-month, and market expectations are for it to remain “at the same level as the previous month” this time as well. If the core CPI shows stability as expected by the market, the stock market will once again welcome the easing of high prices, and the decline in long-term interest rates will provide a strong tailwind for high-tech stocks.
Key Point 2: US Valuation Expansion and the “MOVE Index (Bond Volatility)”
Regarding the next focus of the US market, it is critically important not only to look at corporate earnings (EPS) but also “whether an environment is in place where PER (valuation) can expand.” EPS growth itself is already largely priced into the market, and for stock prices to rise further, an upward shift in PER is essential.
The indicator to focus on here is the “MOVE Index,” which shows volatility in the bond market (equivalent to the VIX index in the stock market). In the current market, the MOVE index had surged, reflecting concerns about inflation, rising crude oil prices, and caution in the credit market. However, signs of calm are finally beginning to appear. If bond market volatility subsides and long-term interest rates stabilize, the weight that has been suppressing the stock market’s PER will be lifted, and strong valuation expansion (stock price appreciation) can be expected, centered on high-tech stocks.
Key Point 3: High Interest Rates and “Corporate Profitability (EBITDA Margin)”
In the US, long-term interest rates remain high, and the market is constantly asking, “Can stock price appreciation coexist under these high interest rates?” In past data, a common condition during periods when stock prices rose strongly even while interest rates were rising was that “corporate EBITDA margins (profitability) were expanding solidly.” Currently, the margins of S&P 500 companies remain at a high level, offsetting the burden of rising interest rates through excellent profitability. In the earnings announcements of major US companies starting next week, it will be strictly scrutinized whether each company is appropriately passing on costs and maintaining high profit margins.
5. Medium- to Long-Term Market Outlook and Investment Strategy
Regarding the impact of the November US midterm elections on the market, and the “true resilience to high interest rates” possessed by Japanese companies.
US Midterm Election Outlook: Market Scenario if the Democratic Party Retakes Both Houses
In the US midterm elections approaching in early November, the current situation shows an increasing probability that “the Democratic Party will win a majority in both the House and Senate (regain control).” Generally, when the majority in Congress changes, policy uncertainty arises, but “even if the Democratic Party controls both houses, there are significant positive aspects for the stock market.” The reasons are the following two points.
First is the calming of Middle East and energy policies. If the Democratic Party takes control of Congress, it will be difficult for Congress to approve quagmire military conflicts or continued tensions with Iran, etc., that involve huge financial burdens. As a result, the situation in the Middle East will move toward a gradual calm, creating the benefit of receding inflationary pressure caused by high crude oil prices.
Second is the low risk of extreme policy changes. A “gridlock” will occur between President Trump in the White House and the Democratic-controlled Congress, but because the President has veto power, the possibility of extreme regulatory tightening or tax increases that bind corporate activities proceeding rapidly will be kept low. Therefore, regardless of the composition of Congress, it is judged that the US stock market can sufficiently maintain a gradual upward trend.
Domestic Interim Earnings Outlook: “Rush of Upward Earnings Revisions” Foretold by the Tankan Survey
In the Japanese market, the upcoming April-September interim earnings results have an extremely bright outlook. The biggest basis for this is the “year-on-year trend of ordinary profit plans” in the Bank of Japan’s Tankan survey released on October 1st. It is customary for Japanese companies to maintain cautious and conservative earnings forecasts even at the time of the September survey. However, in this September survey, ordinary profit plans have jumped sharply into positive territory. This is proof that earnings progress up to the summer was extremely smooth, and it suggests that in the interim earnings announcements starting now, there is an extremely high probability that a “rush of upward revisions to full-year earnings” will occur across a wide range of Japanese industries, not limited to AI semiconductors.
Resilience of Japanese Companies: “High Interest Rate Tolerance” Brought by a 70% Break-Even Point Ratio
While long-term interest rates are trending upward in both Japan and the US, the reason Japanese companies can overcome rising interest rates is their “historically low break-even point ratio.” As a result of many years of structural reform and cost-cutting efforts, the current break-even point ratio for Japanese companies has fallen to about “70%.” A break-even point ratio of 70% means that they have an extremely resilient constitution where, even if “corporate sales were to disappear by 30% due to an economic slowdown or high crude oil prices, they could still secure profits without falling into the red.” Even if interest rates and raw material costs rise, current Japanese companies possess both the defensive power to continue generating sufficient profits and the ability to earn. Therefore, there is no need to be overly afraid of rising interest rates, and the stock price appreciation scenario backed by strong earnings will be firmly maintained.
6. Summary
The stock market in the second week of October 2026 experienced rough price movements, with profit-taking sales pushing prices down toward the weekend, immediately after experiencing the frenzy of the Nikkei Stock Average temporarily recovering to 70,000 yen and the Nasdaq hitting a record high.
However, the underlying trend of the market remains extremely strong. Expectations for a recovery in crude oil supply and the view that the U.S. interest rate hikes are pausing are easing macroeconomic anxieties, and as indicated by the rebound in the NT ratio, capital is returning to growth sectors. Above all, the earnings base of Japanese companies, supported by a break-even point ratio of 70%, and the expectations for upward revisions in interim financial results signaled by the Tankan survey, serve as an unshakable foundation for the market in the second half of the year.
While calmly assessing the major U.S. corporate earnings and CPI figures that will begin in earnest next week, firmly capturing leading AI growth stocks, symbolized by Advantest and Rorze, as well as high-quality domestic demand stocks that have established pricing power and high profitability, will be the surest path to steadily winning in the full-scale autumn market rally.