Japan’s Nikkei share gauge experienced a slight decline on Monday, influenced by increasing expectations for central bank rate hikes that impacted risk sentiment. The benchmark Nikkei 225 declined by 1.97%, concluding the session at 65,096.63, after rebounding from a prior drop of up to 2.37%. The broader Topix declined by 0.84%, settling at 4,111.71. Wall Street’s main indexes concluded the previous week on a downward trajectory following Federal Reserve Chair Kevin Warsh’s reaffirmation of the central bank’s commitment to combating inflation, thereby heightening the likelihood of an interest rate increase.

Equity markets in Asia experienced a general decline following the exchange of strikes between the United States and Iran, marking the sixth month of their ongoing conflict. Markets have incorporated a high probability that the Bank of Japan will increase interest rates at its upcoming meeting. Yields on Japanese government bonds reached new multi-decade highs on Monday. “In addition to last week’s decline in U.S. stocks, growing expectations of U.S. interest rate hikes following remarks by Warsh are likely to weigh on investor sentiment,” Takayuki Miyajima said in a note.

“On the other hand, financial stocks may see buying interest driven by expectations of rising domestic interest rates, and the Topix is expected to hold up better than the Nikkei 225.” The Nikkei commenced its upward trajectory following a brief dip beneath the 65,000 threshold, regarded as a “key support level,” according to Maki Sawada, an equities strategist at Nomura Securities. On the Nikkei 225, there were 131 advancers compared to 91 decliners, with 3 remaining unchanged. The largest losers were Mitsubishi Materials, down 6.57%, followed by Japan Steel Works, 5.61% lower, and Advantest, down 4.48%.

The largest gainers were Tokai Carbon, up 7.7%, followed by Kansai Electric Power, 7.58% higher, and JTEKT, which gained 5.68%. In the broader market, Ichibanya surged by its daily limit, or 15.9%, following House Foods Group’s announcement that it is contemplating various options, including delisting, for its stake in the curry restaurant chain. House Foods shares jumped 7%.