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Nikkei drops further on Italian political turmoil

JIJI

Stocks lost further ground Wednesday on concerns over the political turmoil on Italy.

The Nikkei 225 closed down 144.84 points at the day’s low of 11,253.97 after diving 263.71 points Tuesday. The Topix slumped 13.05 points to end at 953.72 after losing 13.93 points the previous day.

After opening slightly higher, the key indexes soon sank into negative territory, pressured by a wave of small-lot selling of index futures, brokers said.

Behind the poor performance was growing uncertainty over the course of fiscal reconstruction in Italy after center-right forces, opposed to austerity, increased their parliamentary seats in a general election earlier this week.

The indexes accelerated their downswings in late afternoon trading, hit by futures-led selling, as the yen strengthened against the dollar, brokers said.

The TSE had not been affected much by overseas risks in its upsurge since mid-November, but the Italian concerns poured cold water on the market, an official at an online brokerage said.

Nevertheless, Hideyuki Suzuki, general manager and head of the investment market research department at SBI Securities Co., downplayed such senitment.

“I don’t think the Italian political concerns will become as serious as the Greek debt crisis because the safety net, including ESM (the European Stability Mechanism), has been developed,” Suzuki said.

Rather, “Friday’s deadline for mandatory spending cuts in the U.S. is a big worry for investors,” he said. “Market participants observed there will be no more positive factors” after major events in Japan, such as the passage of a supplementary budget for fiscal 2012 and news of the government’s nominees for the Bank of Japan’s next leaders and of its possible decision to join the Trans-Pacific Partnership negotiations.

Losers topped winners 1,092 to 501 on the first section, while 105 issues were unchanged. Volume fell to 3.119 billion shares from Tuesday’s 3.904 billion.

JGBs log solid rise

Japanese government bonds rose Wednesday for the fifth straight trading day, helped by the yen rise and weaker Tokyo stocks in a risk-averse mood, sending a key 10-year JGB yield to a new low.

In late interdealer trading, the yield on the latest 327th 10-year JGB issue with a 0.8 percent coupon was at 0.670 percent, the lowest for a key 10-year JGB yield since June 2003 and down from 0.680 percent late Tuesday.