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Tokyo stocks drop further on falling oil prices

JIJI

Stocks lost further ground on the Tokyo Stock Exchange Wednesday, pressured by slumping crude oil prices.

The 225-issue Nikkei average fell 191.53 points, or 0.98 percent, to close at 19,301.07. On Tuesday, the key market gauge shed 205.55 points.

The TOPIX index of all first-section issues ended down 13.15 points, or 0.84 percent, at 1,555.58, after losing 16.48 points the previous day.

Tokyo stocks met with selling from the outset of Wednesday’s trading after U.S. equities retreated further on Tuesday, weighed down by falling crude oil prices and worries about Chinese and global economic slowdowns.

The benchmark January contract on West Texas Intermediate crude oil futures briefly fell below 37 dollars per barrel on the New York Mercantile Exchange Tuesday.

China’s dismal trade statistics for November, released Tuesday, also pressured U.S. equities, which in turn pushed down the Tokyo market, brokers said.

Stocks extended losses late in the morning session as the yen strengthened against the dollar.

The market showed some resilience in the afternoon session, backed by stronger-than-expected Japanese machinery orders data for October, released in the early morning, but the key market gauges were unable to climb out of negative territory throughout the day.

The country’s seasonally adjusted core machinery orders in October rose 10.7 percent from the previous month, compared with a median estimate of a 1.4 percent decline by 19 economic research institutes surveyed by Jiji Press.

But the brisk data failed to offset worries about negative effects from slumping crude oil prices, brokers said.

“Lower crude oil prices are basically positive for the Japanese economy, but concerns grew that investment funds may sell stocks to cover their losses,” said Kenichi Hirano, market analyst at K Asset Co.

“Investor concerns also stemmed from the fact that OPEC (Organization of the Petroleum Exporting Countries) failed to agree to reduce oil production levels because member oil producers were uncertain whether an output cut by the group alone will push up oil prices,” Hirano said.

An official of a major securities firm underscored the need to watch crude oil price swings, which have a strong correlation with movements of U.S. stock prices, although there are signs that the Japanese economy is improving.

Falling issues overwhelmed rising ones 1,442 to 371 in the TSE’s first section, while 110 issues were unchanged.

Volume increased to 2.04 billion shares from Tuesday’s 1.92 billion shares.

Mega-banks Mitsubishi UFJ and Mizuho and insurers Dai-ichi Life and Tokio & Marine were downbeat, along with drug makers Astellas and Eisai.

Also on the minus side were clothing store chain operator Fast Retailing, Japan Tobacco, industrial robot producer Fanuc and electronics makers Sony and Panasonic.

On the other hand, oil companies, including JX Holdings, Inpex and Japex, shed earlier losses to end higher thanks to buybacks after their recent falls.

In index futures trading on the Osaka Exchange, the key December contract on the Nikkei average finished down 190 points at 19,300.