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Nikkei tumbles on yen rise, risk-averse mood

JIJI

Stocks fell back sharply Tuesday, dampened by the yen’s strengthening and falls in overseas markets amid a growing risk-averse mood.

The 225-issue Nikkei average closed down 361.75 points, or 2.63 percent, at 13,396.38, the lowest closing level since June 27. On Monday, the key market gauge climbed 108.02 points.

The Topix index of all first-section issues fell 23.86 points, or 2.08 percent, to end at 1,125.27, after advancing 6.48 points the previous day.

The Tokyo market got off to a lackluster start after the Dow Jones industrial average dropped for the fourth straight session, its longest losing streak since late December, amid concerns over the negative impact of rising U.S. long-term interest rates on the real economy.

After the initial selling ran its course, the Nikkei average trimmed losses thanks to some buybacks in the late morning.

But the key market yardstick extended losses sharply in the afternoon, dragged down by futures-led selling following the yen’s rise and tumbles in currencies and stocks in some Asian emerging economies.

The U.S. 10-year Treasury yield hit a two-year high of 2.88 percent Monday.

“A widening gap between U.S. and Japan interest rates is usually supposed to serve as a positive factor for Japanese stocks through falls in the yen against the dollar, but for today, it has made investors risk-averse and prompted yen purchases and selling of Japanese stocks due to wariness over a ‘bad’ rise in interest rates,” said Takuya Takahashi, senior market analyst at Daiwa Securities Co.

The Tokyo market was weighed down by stock tumbles in emerging markets, including Thailand and Indonesia, and currencies such as India’s rupee and Thailand’s baht amid concerns over money outflows due to the possible tapering off of the U.S. Federal Reserve’s quantitative monetary easing, brokers said.

Declining issues trounced advancing ones 1,489 to 195 in the TSE’s first section, while 67 issues were unchanged. Volume rose to 2.001 billion shares from Monday’s year-to-date low of 1.443 billion.

JGBs rebound

Japanese government rebounded Tuesday, buoyed by purchases on the back of the stock market’s tumble.

The lead September futures contract on 10-year JGBs climbed 0.26 point from Monday to end at 143.99. Turnover ballooned to 21,559 contracts from 12,603.