The Nikkei 225 average plummeted Tuesday to the lowest closing level in almost four months, with market sentiment bruised by a plunge on Wall Street and a strengthening of the yen.
The Nikkei tumbled 610.66 points, or 4.18 percent, to close at the day’s low of 14,008.47, its worst closing level since Oct. 8 and the steepest single-day drop since a 843.94-point loss last June 13. On Monday, the Nikkei tumbled 295.40 points. The Topix fell 57.05 points, or 4.77 percent, to finish at 1,139.27 after dropping 24.32 points Monday.
Stocks here came under heavy selling pressure after the Dow Jones industrial average skidded Monday to its lowest closing level in about 3½ months. The Dow’s tumble reflected heightened wariness over the course of the global economy following the dismal outcome of the U.S. Institute for Supply Management’s manufacturing index for January.
Investor sentiment was also hurt by the yen’s appreciation, particularly against the dollar. In New York trading overnight, the dollar briefly fell to ¥100.77, the lowest level since Nov. 21.
With the dollar also slipping below ¥101 in Tokyo trading, the Nikkei average extended losses late in the afternoon session, hit by unwinding of futures-linked arbitrage positions amid a growing “risk off” mood, brokers said.
Weakness of other Asian equities also poured cold water on the TSE, brokers said.
“Worries spread not only to emerging economics but also to the U.S. economy” following the dismal ISM data, said Hiroichi Nishi, equity general manager at SMBC Nikko Securities Inc.
An official at a major brokerage said investors have developed a sense of uncertainty, which has led to the current risk-averse sentiment.
Still, analysts agree that Tokyo stocks have been oversold as suggested by several technical charts. Since the beginning of the year, the Nikkei has nose-dived 14 percent.
Losers trounced winners 1,764 to 13 in the first section, while three issues were unchanged.
Volume increased to 4.233 billion shares from Monday’s 2.920 billion.
Weak JGB auction
Japanese government bonds managed to stay higher after erasing most of their earlier gains on weaker than expected results of the day’s auction of new 10-year JGBs.
The lead March futures contract on 10-year JGBs closed up 0.04 point from Monday at 144.82. Volume swelled to 37,633 contracts from 23,342.