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Nikkei winning streak snapped by profit-taking

JIJI

Stocks retreated sharply Tuesday, dragged down by selling to cash in gains after the recent surge.

The Nikkei 225 average closed down 213.43 points, or 1.90 percent, at 11,046.92. On Monday, the key market gauge climbed 69.01 points. The Topix fell 16.05 points, or 1.68 percent, to end at 939.70, after gaining 13.10 points the previous day.

Both indexes snapped five-session winning streaks.

Stocks came under heavy profit-taking pressure from the outset of Tuesday’s trading after U.S. and major European equities tumbled overnight due to wariness over political confusion in Italy and Spain.

Concerns grew over the course of fiscal reconstruction in the debt-laden European countries. The public support rate rose for the party led by former Italian Prime Minister Silvio Berlusconi, who is critical of the government’s fiscal reforms, before a general election late this month, while Spanish Prime Minister Mariano Rajoy has been embroiled in a money scandal.

A halt in the yen’s weakening also weighed down the TSE, brokers said.

The Nikkei accelerated its downswing in the afternoon, pressured by large-lot selling of index futures amid lackluster performances of Asian equities, brokers said.

“I believe today’s tumble was a temporary correction. Investors used the European political woes as an excuse for profit-taking,” said Hiroaki Hiwada, senior strategist in the investment information department at Toyo Securities Co. “The Nikkei resisted falling below the 11,000 line, with its downside supported by buying from investors who missed opportunities to purchase stocks amid the recent rapid rise.”

Stock prices may show wild swings prior to Friday’s special quotation fixing to settle February index options contracts, brokers said.

Falling issues far outnumbered rising ones 1,326 to 300 in the first section, while 68 issues were unchanged. Trading remained active, with volume increasing from Monday’s 4.453 billion shares to 4.803 billion, the highest level since March 16, 2011.

Decent auction for JGBs

Japanese government bonds rebounded Tuesday thanks to buying on dips, while the day’s auction of a new 10-year JGB issue went without a major hitch.

The lead March contract on 10-year JGBs finished up 0.22 point from Monday at 143.90. Volume fell to 42,938 contracts from 43,662.