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Nikkei loses ground on Wall St. drop, firmer yen

JIJI

Stocks lost ground Wednesday, dragged down by selling after a drop in U.S. equities and a halt in the yen’s easing.

The Nikkei 225 average lost 96.25 points to end at 15,515.06. The Topix closed 5.88 points lower at 1,250.45.

Selling outpaced buying from the outset of Wednesday’s trading in the wake of an overnight drop on Wall Street and the yen’s firmness, brokers said.

Still, the key market indexes resisted falling further thanks to buying on dips on the back of persistent hopes for a further stock price rise.

In early afternoon trading, the Nikkei extended losses to more than 200 points due chiefly to futures-led selling prompted by poor performances of other Asian bourses, including mainland China and Hong Kong, brokers said.

The key indexes trimmed losses later, helped by buybacks and renewed buying on dips, brokers said.

Hedge funds sold stock index futures and bought the yen in the afternoon, an official at a bank-affiliated brokerage said.

However, the TSE’s downside was limited as “market participants bought on dips when the Nikkei average slipped below 15,400″ due to expectations for corporate earnings recoveries, said Hiroaki Hiwada, senior strategist at the investment information department of Toyo Securities Co.

Investors also took a wait-and-see stance prior to the U.S. Federal Reserve’s two-day Federal Open Market Committee meeting that starts next Tuesday as well as the release Monday of the Bank of Japan’s “tankan” quarterly business sentiment survey, Hiwada said.

Several analysts pointed to the growing possibility that the Fed will decide to start tapering off its quantitative easing policy this month, after Democrats and Republicans reached an agreement Tuesday in their budget negotiations that is expected to prevent a government shutdown on Jan. 15.

Loserst outpaced winners 1,209 to 425 in the first section, while 134 issues were unchanged. Volume increased to 2.349 billion shares from Tuesday’s 2.142 billion.

JGBs gain traction

Japanese government bonds were higher Wednesday, backed by higher U.S. bond prices and a stock sell-off.

The new lead March contract on 10-year JGBs increased by 0.13 point from Tuesday to end at 144.14. Volume declined to 27,080 contracts from 31,600 contracts on Monday.