The Nikkei 225 index remained in a tight range on Wednesday after Japan released strong GDP data, raising the case for another rate hike next week. It was trading at ¥39,187, a few points below the recent high of ¥39,765.

Japan’s economy is doing well

There are signs that the Japanese economy is doing modestly well. According to the country’s statistics agency, the economy grew by 0.3% QoQ in the third quarter, higher than the median estimate of 0.2%. 

Japan’s economy grew because of government spending, which helped to offset a retreat in capital expenditure and private consumption. 

Another report released on Wednesday showed that the county’s external demand dropped by 0.2% in the third quarter, better than the median estimate of minus 0.4%. The BS large manufacturing conditions rose from 4.5 in Q3 to 6.3 in Q4, higher than the median estimate of 1.8.

Another report showed that Japan’s inflation was still higher than expected. The producer price index (PPI) rose from 3.6% to 3.7% on an annual basis and to 0.3% monthly. 

The next important economic data to watch will be Friday’s Tankan survey numbers, which will provide more color about the state of the economy. Analysts expect these numbers to reveal that small and large businesses did well in the fourth quarter.

All these economic numbers are important because the Bank of Japan will meet next week and deliver its decision. Economists believe that the BoJ will maintain a fairly hawkish tone and then hike interest rates by 0.25% in this meeting. In a recent statement, a Bloomberg analyst said:

“Putting it all together, we think the Bank of Japan will take the GDP report as more evidence that the economy is becoming sturdy enough to withstand a further reduction in stimulus.”

Top Nikkei index movers

Most companies in the Nikkei 225 index were largely unmoved on Wednesday. Kawasaki Heavy Industries stock rose by 7.75%, making it the best performer in the index. The company manufactures products like trains, ships, and turbines. 

The other best-performing companies in the Nikkei index were IHI Corp, Konica Minolta, T&D Holdings, and Kuraray.

Softbank, one of the biggest companies in the country, rose by 0.8%, while Toyota dropped by 0.35%. The top laggards on Wednesday were firms like Ebara, Sumitomo Dainippon Pharmaceuticals, Sumitomo Chemical, and Daiichi Sankyo.

Looking ahead, the next potential catalyst for the Nikkei 225 index will be the US inflation data on Wednesday. This is an important number because of its impact on next week’s Federal Reserve decision. 

A higher number means that the Fed may not hike rates, which will likely have an impact on global stocks. 

Nikkei 225 index analysis

Nikkei index chart | Source: TradingView

The daily chart shows that the Nikkei 225 index has been in a tight range in the past few days. It has formed a symmetrical triangle pattern and is now slightly below its upper side. 

The index has remained slightly above the 50-day and 100-day Exponential Moving Averages (EMA). Also, the Relative Strength Index (RSI) and the MACD indicators have moved sideways.

Therefore, the Nikkei index will likely have a strong move in the next few days since the two lines of the triangle pattern are nearing its confluence level. A bullish breakout will likely see it rise above the key resistance point at 40,000. 

The alternative scenario is where it drops below the 50-day and 100-day moving averages and retests the lower side of the triangle pattern. A break below the lower side will point to more downside, potentially to ¥38,000.

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The Nifty 50 index and the USD/INR exchange rate were on edge as investors reflected on the changes to the Reserve Bank of India (RBI). The blue-chip index was trading at ₹24,600, up by 5% from its November lows. 

Meanwhile, the USD/INR exchange rate rose to 84.85, a record high. It has risen by over 2% this year, and analysts expect the Indian rupee to continue its downward trend over time.

Reserve Bank of India changes

The Nifty 50 and USD/INR pair reacted to the decision by the government to replace Shaktikanta Das as the head of the Reserve Bank of India this week. He will be replaced by Sanjay Malhotra, a career bureaucrat to be the next head.

This was an important decision as it came a few days after India released relatively weak GDP numbers. The data showed that the economy slowed to 5.4% in the third quarter, missing the expected forecast of 6.5%. 

As a result, the RBI and other economists have downgraded their estimate for the country’s growth path for the year. For example, analysts at ADB slashed their estimate for the Indian economy to 6.5% from the previous 7.0%.

The RBI also slashed estimates from 7.2% to 6.6%. Also, the bank hinted that inflation will remain strong, with retail inflation in FY25 expected to be 4.8%, up from the previous estimate of 4.5%.

Therefore, with the economy slowing, analysts now expect that the RBI will start cutting interest rates as soon as in its February meeting. Last week, the bank left rates unchanged, but slashed the cash reserve ratio by 50 basis points to 4%. The RBI hopes that cutting that ratio will infuse about $13.7 billion into the banking system.

Top Nifty 50 constituents

Most companies in the Nifty 50 index were relatively unchanged on Wednesday. Britannia Industries, a leading manufacturer of snacks, was the best-performing company in the index as it jumped by 1.8%. Still, the stock has retreated by about 25% from the year-to-date high as its growth slowed.

UltraTech Cement stock rose by almost 2% on Wednesday and was trading at ₹12,000, a few points below the year-to-date high of ₹12,122. It has soared by 135% from its 2022 lows as demand for cement in the country rose. 

Nestle India’s shares rose by 1.56%, while Tata Consumer Products, Hindalco Industries, Grasim Industries, and Bharat Petroleum Industries were the other notable gainers. 

On the other hand, the top laggards in the Nifty 50 index were HCL Tech, ICICI Bank,  Tech Mahindra, Wipro, and Adani Ports & SEZ.

Nifty 50 index analysis

The daily chart shows that the Nifty 50 index has crawled back in the past few weeks. It has risen from ₹23,280 to the current ₹24,630. The index has moved above the 50-day and 100-day Exponential Moving Averages (EMA). It has also formed a small inverse head and shoulders pattern.

Therefore, the index will likely continue rising as bulls target the next key resistance level at ₹25,000. A break above that level would lead to more gains to about ₹26,000 in the longer term. 

The risk, however, is that the index has formed a rising broadening wedge pattern, a popular bearish reversal sign. A drop below the lower side of the wedge pattern will point to more gains.

USD/INR forecast

The daily chart shows that the USD to INR exchange rate has been in a strong bull run in the past few months. It recently rallied above the ascending channel shown in black.

The pair has moved above the 50-day and 100-day Exponential Moving Averages, while oscillators have continued rising. Therefore, the USD/INR pair will likely keep rising as bulls target the next point at 86.50, as Nomura analysts expect.

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The CAC 40 index retreated for two consecutive days as traders waited for this week’s European Central Bank (ECB) decision. It retreated to €7,395, down from this week’s high of €7,510.

ECB decision ahead

The biggest event for the CAC 40 and other European indices will be the upcoming European Central Bank (ECB) decision. 

Recent economic numbers from France and the region shows that a rate cut will be needed. The manufacturing and services PMI numbers remained below 50 in October, signaling that the country’s recovery is slowing. 

Economists expect the ECB will continue with its interest rate cuts. Precisely, analysts see the bank slashing rates by 0.25%, bringing the benchmark interest rates to 3.25%.

The bank has already slashed rates by 0.75% this year as it aims to avoid a hard landing of the economy. 

Hopes of rate cuts have helped to push the French government bond yields downward. The ten-year yield dropped to 2.89%, its lowest level since October 3. Similarly, the five-year yield dropped to 2.4%.

The ECB decision comes at a time when France is going through a political crisis. Michel Barnier’s government collapsed last week because of disagreements on the budget. This collapse added to more concerns about the economy.

The CAC 40 index has also wavered as investors remained on edge about the upcoming Donald Trump administration. In his campaign, he mostly focused on trade and hinted that he would restart his trade war, a move that will affect many French companies. 

China risks remain

The CAC 40 index is also reacting to the ongoing economic weakness in China, where many companies do business. 

Data released this week showed that China’s exports and imports dropped as officials in Beijing continued to talk about boosting stimulus. 

Beijing has resigned to the fact that the economy may not hit the 5% growth target it set earlier this year. 

Most of the worst-performing companies in the CAC 40 index are those with a large exposure to China, a country where consumer spending has slowed.

Kering, the parent company of Gucci, has collapsed by almost 40% this year, making it the second-worst performer in the CAC 40 index. Its retreat happened as it warned about weak consumer spending in the country. 

LVMH, the parent company of Dior and Louis Vuitton, has also dropped by 13% this year as sales in the country slows. 

STMicroelectronics stock has plunged by 45% this year, making it the worst-performing company in the CAC 40 index. STM is one of the biggest contract manufacturers in the European chip industry.

Other top names with an exposure to the Chinese market like L’Oreal, Pernod Ricard, and Stellantis are the other top laggards in the CAC 40 index. 

On the other hand, the top gainers in the CAC 40 index are the likes of Safran, Publicis Groupe, EssilorLuxottica, Saint Gobain, and Schneider Electric.

CAC 40 index analysis

CAC 40 index chart by TradingView

The daily chart shows that the CAC 40 index has held steady in the past few days. It has remained below the descending trendline that connects the highest swings since May 14. 

The index is consolidating at the 50-day and 100-day Exponential Moving Averages (EMA). Also, it has dropped below the 23.6% Fibonacci Retracement point. 

Before that, the index formed what looks like a double-bottom pattern at around €7,033.

Therefore, there is a likelihood that the index will continue rising as long as bulls flip the descending trendline. If this happens, the next point to watch will be at €8,000, which is about 8.3% above the current level. A drop below the key support at €7,200 will invalidate the bullish view.

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EVgo stock price has bounced back this year, helped by its balance sheet improvement and its growing business. It has soared by about 300% from its lowest level in May, and was trading at $6.60. This rebound has brought its market cap to over $2 billion, making it the biggest EV stock in the United States.

EVGo has faced numerous tailwinds

The number of electric vehicles in the United States is rising, a trend that will continue in the coming years. Data by Statista shows that EV sales in the US are expected to hit about 2.3 million by 2030 from 1.4 million this year. 

More data shows that there are now over 3.3 million EVs in the United States. While the growth has slowed, companies are still selling thousands of battery electric vehicles annually. 

The implication of all this is that demand for public charging stations will continue rising in the next few years. This industry is now dominated by Tesla, which runs the biggest fleet of charging stations in the country.

Other companies that have a market share are EVgo, ChargePoint, Electrify America, and Volta Charging.

Unlike companies like Blink Charging and ChargePoint, EVgo’s business is doing well as the company plots a path towards profitability. This growth happened as the company grew its locations to 1,100 and the number of DC stores in operations to 3,680. It has added 1.2 million customer accounts, a number that will continue growing.

Read more: My EVgo stock price forecast was accurate: here’s what to expect

Earnings growth is continuing

EVgo’s business has seen strong growth in the past few years as its revenue rose from $17.5 million in 2019 to over $161 million.

This growth trajectory continued in the last quarter as its revenue rose by 92% to $67.5 million. Most of this revenue, or about $43.1 million, rose to over $43.1 million. It was the eighth quarter that the charging revenue had double-digit growth. 

The company has made strong progress to accelerate this growtH. For example, it has a partnership with General Motors that will have them run about 400 flagship stores in the near term. 

EVgo is also working to narrow its losses. The recent results showed that its adjusted EBITDA was about $5.4 million, helped by its efficiencies.

It has also worked with the US government to grow the charging infrastructure. It is part of companies that have received funding to accelerate public charging in the US.

Also, the company has received the conditional commitment of financing of loan guarantees worth about $1.05 billion. These funds will be used to build about 7,500 fast charging stations across the country. 

Analysts are optimistic that EVgo’s business will continue doing well in the next few years. Its annual revenue for the year will be $259 million, a 61% increase from what it made last year. Analysts see the revenue figure rising to $360 million next year. EVgo has a long record of doing better than expected. 

The average EVGO stock price forecast is $8, up from the current $6.58. Some of the most upbeat analysts are from JPMorgan and UBS.

EVgo stock price analysis

The daily chart shows that the EVGO share price has bounced back in the past few months. It bottomed at $1.64 and jumped to a high of $9 in October.

The stock has risen above the 50-day and 200-day moving averages, which formed a golden cross pattern on July 30. A golden cross is one of the most bullish patterns in the market. 

EVgo shares have also moved to the first support of Andrew’s pitchfork tool. Therefore, the stock will likely continue rising, with the initial target being at $9, the highest point this year. A break above that level will point to more gains, potentially to $12.65, its highest level in August 2022, which is about 92% above the current level.

Read more: EVgo stock price analysis: risk/reward is very attractive

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Rigetti Computing (RGTI) and IonQ (IONQ) stock prices have done well this year, as investors rotate to quantum computing companies. RGTI shares soared to a high of $6.87, its highest level since June 2022, and 821% higher than the year-to-date low.

IonQ stock soared to $33, up by over 425% from the year-to-date high, pushing its market cap to over $7.12 billion. Rigetti’s market value has soared to more than $1 billion.

Why IonQ and Rigetti Computing surged

IonQ and Rigetti Computing stocks have been in a strong bullish trend in the past few months as investors embraced companies in the quantum computing space.

For starters, quantum computing is a cutting-edge technology that aims to be the next big thing in the computing industry. 

Its technology differs from the current era of computers, which process information in binary bits like 0s and 1s. These computers use qubits, which can exist in multiple states and perform simultaneous tasks faster.

Today’s computers, such as those made by Apple and Dell, are highly advanced and can do more work than those that existed a decade ago. Quantum computers handle solutions faster and can solve some of the most complex problems faster.

The impact is that these computers can be used in some of the most advanced areas like drug discovery, aviation, and artificial intelligence. 

Therefore, the IonQ and Rigetti Computing stocks surged after Google unveiled Willow, its quantum computing chip. In a statement, the company said that the chip had solved a complex calculation in less than five minutes. Today’s fastest supercomputers would take 10 septillion years to solve it. 

Most importantly, the Willow chip has solved the error problem that is common in quantum computing. In its case, the more qubits are used in Willow, the more it reduces errors. 

Therefore, IonQ and Rigetti stocks surged as investors anticipated more growth in the industry in the next few years. 

Rigetti Computing and IonQ are doing well

IONQ and RGTI are still tiny companies that are losing millions of dollars each quarter. The most recent results showed that IONQ’s revenue stood at $12.4 million, a 102% annualized growth. It expects that its annual revenue would be between $38.5 million and $42.5 million. 

IONQ sees its business continuing to grow in the coming years. For example, it secured bookings of $63.5 million in the third quarter, including big one of $54.5 million from the Air Force Research Lab. 

The challenge, however, is that it is still losing millions of dollars and its path towards profitability will be long. It had a net loss of $52.4 million in the last quarter and $129 million in the first nine months of the year.]

Rigetti Computing, on the other hand, is not doing relatively well. Its quarterly revenue stood at about $2.37 million from $3.1 million in the same period last year. Its nine-month revenue dropped to $8.5 million.

The other challenge is that the IONQ and Rigetti stock prices is that they have become highly overbought and overvalued. 

Therefore, there is a likelihood that the stock will retreat in the next few months as the momentum fades. If this happens, the IONQ stock will drop to $21.5, the highest point in September last year. Rigetti stock may drop to $3.4, down by about 46% from the current level.

Read more: IonQ stock has soared: could it soar by 62% to retest $36?

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