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Nikkei logs sharpest drop in 4 months on early US rate hike fears
The 225-issue Nikkei Stock Average ended down 953.15 points, or 3.29 percent, from Friday at 28,010.93, its lowest closing since May 17. The broader Topix index of all First Section issues on the Tokyo Stock Exchange finished 47.11 points, or 2.42 percent, lower at 1,899.45.
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A man stands in front of an electronic board showing Japan’s Nikkei average outside a brokerage firm in Tokyo on Thursday. The Nikkei closed at its lowest in nearly seven months on Thursday with chip-related stocks suffering after a rout in tech stocks inflicted the largest daily decline on Wall Street since 2011. (-/Kim Kyung-Hoon)
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okyo stocks ended sharply lower Monday, with the benchmark Nikkei logging its biggest point drop since Feb. 26 amid fears of a possible US interest rate hike next year following remarks from a Federal Reserve official late last week.
The 225-issue Nikkei Stock Average ended down 953.15 points, or 3.29 percent, from Friday at 28,010.93, its lowest closing since May 17. The broader Topix index of all First Section issues on the Tokyo Stock Exchange finished 47.11 points, or 2.42 percent, lower at 1,899.45.
Every industry category lost ground, but air transportation issues were a bright spot. Major decliners included rubber product, chemical and insurance issues.
The US dollar slipped into the upper 109-yen level from the lower 110-yen range as traders fled to the yen, perceived as a safe-haven asset, following a steep drop in Tokyo shares amid rate hike worries, dealers said.
At 5 p.m., the dollar fetched 110.02-04 yen compared with 110.19-29 yen in New York and 110.00-01 yen in Tokyo at 5 p.m. Friday.
The euro was quoted at $1.1883-1885 and 130.74-78 yen against $1.1863-1873 and 130.64-74 yen in New York and $1.1915-1916 and 131.07-11 yen in Tokyo late Friday afternoon.
The yield on the benchmark 10-year Japanese government bond fell 0.015 percentage point from Friday's close to 0.040 percent, as investors bought the debt following losses in the US Treasury market last week. Bond yields move inversely to prices.
Tokyo stocks lost ground throughout the day, with the Nikkei briefly losing over 1,100 points, or more than 4 percent, after a decline on Wall Street late last week saw the Dow Jones Industrial Average slump to its lowest level this year.
The market took a blow after St. Louis Federal Reserve President James Bullard said Friday during an interview that an initial interest rate hike could be seen as early as late 2022 following an acceleration in inflation, brokers said.
His comment was made after the Fed indicated last week following its policy meeting that it may raise interest rates in 2023, already earlier than expected, fueling concerns that stimulus tapering plans would also be moved forward.
"Investors overreacted to Mr. Bullard's remarks, as he was widely seen as dovish," said Toshikazu Horiuchi, an equity strategist at IwaiCosmo Securities, explaining that the global economy is on track to recovery.
Read also: Rupiah sliding since Fed June meeting
The further decline in shares is likely to be limited as the market is expected to be bolstered by Japan's accelerating COVID-19 vaccination rollout and improving earnings results by US and Japanese companies, some brokers said.
"The market is expected to be volatile throughout the week, with the Nikkei's downside supported at around 27,500," said Yutaka Miura, senior technical analyst at Mizuho Securities.
On the First Section, declining issues outnumbered advancers 2,044 to 123, while 26 ended unchanged.
Blue chip shares fell sharply, with Fanuc dropping 1,540 yen, or 5.6 percent, to 25,865 yen.
Softbank Group fell 275 yen, or 3.5 percent, to 7,559 yen, Tokyo Electron declined 1,990 yen, or 4.0 percent, to 47,570 yen, and Fast Retailing slid 3,590 yen, or 4.4 percent, to 78,880 yen.
Trading volume on the main section fell to 1,301.08 million shares from Friday's 1,512.55 million shares.
