Japan's Nikkei 225 index was trading 0.8 percent higher on Friday. The decline faced by Japanese stocks this week has been mainly due to selling pressure at higher levels. Nikkei 225 is finding it hard to stay above 40,000 levels and for the current week, it has even faced resistance at 39,700.

The Nikkei 225 index displayed resilience on Friday despite experiencing a week of overall decline. Key Japanese exporters, including Nissan, Honda, and Toyota, traded higher, benefitting from the weaker yen, which boosts their overseas earnings. Financial stocks like Mizuho Financial surged following favorable profit forecasts due to recent rate hikes by the Bank of Japan. However, ongoing economic uncertainties and Federal Reserve Chair Jerome Powell’s remarks hinting at a potential pause in rate cuts have tempered market optimism. Meanwhile, Chinese equities face further pressure as disappointing earnings from JD.com highlight persistent economic struggles.

Nikkei 225 Holds Firm Amid Weekly Losses

Decline After Last Week's Gains The Nikkei 225 index faced losses for most trading sessions this week, closing approximately 1.75% lower after a significant 3.8% rise the previous week. Despite the downward trend, Friday saw a firmer stance, with key Japanese corporations exhibiting strong performance in early trading.

Surge in Key Stocks Boosts Market Sentiment

Notable Gains Across Major Japanese Corporations Mizuho Financial Group saw a remarkable 6.3% increase, while Nissan Motors and Mitsubishi Heavy Industries also reported gains of 4.5% and 1.2%, respectively. Additionally, Honda Motor and Toyota traded firmly, each advancing by about 2% amid favorable market conditions.

Federal Reserve Chair Signals Potential Rate Hold

Impact of Jerome Powell’s Comments on Risk Sentiment Federal Reserve Chair Jerome Powell's recent statements introduced a potential pause in future rate cuts, emphasizing patience amid a robust labor market and persistent inflation. This hint of a rate hold has generated mixed sentiments in global markets, as investors weigh the Fed’s caution against inflationary pressures.

Technical Analysis: Rising Wedge Pattern for Nikkei 225

Key Support and Resistance Levels to Watch The Nikkei 225 remains within a rising wedge formation, with successive higher lows underscoring buyer interest. Traders are eyeing the 38,320 level as crucial support, while potential resistance at 40,200 and 41,000 represents prospective targets on the upside.

Weak Yen Fuels Japanese Exporters’ Gains

Currency Advantage for Companies like Toyota, Honda, and Nissan The weakening yen has bolstered Japanese exporters, enhancing overseas revenue when converted to local currency. Nissan’s stock surged 4.7%, spurred by favorable investment news, while Toyota and Honda also benefitted from exchange rate advantages.

Japanese Financials Gain on Bank of Japan's Rate Hike

Improved Profit Margins Lift Financial Stocks Japanese financial firms, particularly Mizuho Financial Group, experienced gains following the Bank of Japan's recent rate increases, which have positively impacted lending margins. The optimistic outlook in financials comes amid a challenging week for broader Japanese indices.

Chinese Equities Falter Amid Economic Concerns

Nasdaq Golden Dragon China Index Faces Third Consecutive Decline Chinese stocks continued their downturn, with the Nasdaq Golden Dragon China Index falling by 1.8% for the third day in a row. JD.com’s disappointing revenue has accentuated ongoing economic difficulties in China, raising concerns about the efficacy of recent economic stimulus measures in reviving consumer demand.

Chinese markets were also trading with decline after Donald Trump won the US Presidential Elections. Chinese government's stimulus plan for boosting economy fell short of investor expectations. And, Trump has again said that he will increase import duty to Chinese products. Even if the real impact of increased duties will be limited, the investors confidence in Chinese stocks could see a decline in the short term.