Japan's Nikkei Finds a Floor? Here's Why Thursday Could See a Bounce

Japan’s benchmark index just got hit hard—down nearly 2,200 points (4.2%) over consecutive sessions and now hovering around 50,200. Sounds grim, but here’s the thing: when you drop that fast, you usually get bargain hunters stepping in.

Wednesday was brutal across the board. The Nikkei fell 1,284.93 points (-2.50%) to 50,212.27, with no sector spared. Tech stocks, financials, and automakers all took their lumps:

• Softbank Group got hammered (-10.02%)
• Toyota dropped 3.65%
• Hitachi plunged 4.27%
• Auto sector got punished: Mazda (-3.12%), Nissan (-2.75%)

But here’s the contrarian signal: Wall Street rallied overnight. The U.S. markets shook off Tuesday’s selloff (valuations concern) and found their footing on two things—(1) bargain hunting and (2) better-than-expected economic data. ADP showed private sector employment rebounded in October, and the ISM services index ticked back into expansion territory.

The Dow +0.48%, NASDAQ +0.65%, S&P 500 +0.37% all closed in the green. Crude oil pulled back (-1.52% to $59.64/barrel) on supply concerns, but that’s a separate story.

The setup: Asian markets are expected to follow Wall Street’s lead into Thursday. With the Nikkei now oversold and global risk appetite returning, expect some mean-reversion bounce. Whether it sticks depends on what earnings reports and China’s economic data throw at us next.