Shares fell in Tokyo on Thursday, cutting short Wednesday’s rebound, after U.S. stocks tumbled amid declining oil prices and continued anxiety over Chinese growth.
The Nikkei average slid 2.7 percent to 17,240.95 at the close of trading, while the Topix index lost 2.5 percent to 1,406.55.
The Topix pared an earlier decline of as much as 4.1 percent as markets in China rebounded, but was still the biggest loser among benchmark indexes in Asia at the time of the Tokyo close. It jumped 2.9 percent Wednesday, climbing for the first time this year after sinking 9.4 percent in the first six trading days of 2016.
“Negativity is spiraling,” said Ayako Sera, a Tokyo-based market strategist at Sumitomo Mitsui Trust Bank Ltd. “Seeing the drop in New York shares, people are continuing to sell down risk assets in the Tokyo market. Psychologically, investors are too nervous to buy back shares.”
Volume on the Topix was 27 percent above the 30-day average. The Nikkei 225 Stock Average Volatility Index, based on options prices, jumped 14 percent to 31.76 after dropping 13 percent on Wednesday.
Oil explorers, trading companies and drugmakers led declines among the 33 Topix industry groups, which all fell.
Global equities have been hammered this year amid concern China is struggling to manage its slowing economy. The Standard & Poor’s 500 Index tumbled to its lowest level since September on Wednesday and U.S. small caps entered a bear market as oil’s failure to maintain a 4 percent rally rekindled a flight from risk assets. Brent crude dipped below $30 for the first time since 2004.
“There’s a vague worry in the market that cheap oil will worsen the Chinese economy further than expected, and that oil producing countries will sell their risk assets,” said Mitsushige Akino, Tokyo-based executive officer at Ichiyoshi Asset Management Co. “The market’s logic at the moment is that as long as oil prices remain low, risk assets will keep being sold.”
November core machine orders, an indicator of future capital spending, fell 14 percent on the month, worse than economists’ estimates for a 7.3 percent drop.
The Topix trades at 13.8 times estimated earnings after a rout this year erased about ¥39 trillion from its market value. The 14-day relative strength index on the gauge was at 31.3 on Thursday after sliding below 30 on Tuesday, a level some traders use as a signal shares are poised for a rebound.
The Nikkei is among the worst performing developed markets this year, dropping 9.4 percent as the yen strengthens. Japanese shares were one of the quickest to recover following the rout last year that began when China surprised markets by devaluing the yuan in August. The Topix finished 2015 with a 9.9 percent advance, but has given nearly all of that back this year.
“Negative sentiment is dominating the market,” Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone. “The market focus keeps shifting whenever there’s positive news. We saw very good trade numbers from China yesterday and yet we’ve seen the rebound being short-lived as the focus shifted to commodities. It’s hard to get bullish at this stage.”