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Nikkei nose-dives over worries about emerging economies

JIJI

Stocks tumbled Monday amid growing concerns over the future course of emerging economies, with the Nikkei 225 average sinking to its lowest level in 2½ months.

The Nikkei lost 385.83 points, or 2.51 percent, to end at 15,005.73, a closing level not seen since Nov. 14. On Friday, the key gauge dropped 304.33 points.

The Topix ended down 35.37 points, or 2.80 percent, at 1,229.23 after falling 22.92 points Friday.

The market took a dive right after the opening bell, following plunges in U.S. and European equities over the weekend. In New York on Friday, the Dow Jones industrial average fell nearly 2 percent, after a sell-off of the Argentine peso fueled worries about the strength of emerging markets that were prompted by the release of disappointing Chinese manufacturing data for January.

Caution spread to Tokyo, with the Nikkei losing more than 400 points in early morning trading to slip through 15,000 for the first time since Nov. 15 on an intraday basis, brokers said.

The yen’s strengthening against the dollar and other major currencies in a spreading risk-off mood also dampened export-oriented stocks. The dollar fell to ¥101.72 in the early morning, before firming slightly above ¥102.

The sharp decline on the cash stock market was also due to investors’ unwinding of arbitrage positions with futures to secure profits, an official at a bank-affiliated brokerage firm said.

After the initial selling ran its course, however, the Nikkei showed resilience, underpinned by buying on dips, the official said.

The concerns about emerging economies stemming from the recent dismal Chinese macroeconomic data and the Argentine peso’s erosion may be excessive, said Ryuta Otsuka, strategist in Toyo Securities Co.’s investment information department.

Every country has its own problems, he noted, and Japanese stocks currently seem attractive in terms of market valuation.

Meanwhile, players are focusing on the outcome of the U.S. Federal Reserve’s policy-setting Federal Open Market Committee meeting this week. They largely expect the Fed to announce an additional cut of $10 billion in its asset purchases.

Investors are also waiting for April-December earnings reports from Japanese firms. Although expectations are high that their earnings will show improvements thanks to the yen’s depreciation, players want to make sure there are no negative surprises, brokers said.

Falling first-section issues trounced rising ones 1,744 to 29, while six issues were unchanged.

Amid the broad-based selling, all 33 first-section subindexes lost ground.

JGB futures shed gains

The key Japanese government bond futures contract ended only a tad higher Monday after shedding most of its early gains eked out on growing concerns over the course of emerging economies.

The lead March contract on 10-year JGBs was up 0.02 point from Friday at 144.64. Volume dropped to 31,669 contracts from 36,374.

In late interdealer trading in cash JGBs, the yield on the latest 332nd 10-year JGB issue with a 0.6 percent coupon stood at 0.630 percent, up from 0.625 percent late Friday.