The Nikkei 225 stock average tumbled 3.8 percent Monday as investor confidence took a beating amid worries about a potential debt crisis in Hungary and disappointing U.S. employment data, while the yen’s strength against the euro hurt exporter shares.
The Nikkei dropped 380.39 points, or 3.84 percent, from Friday to close at 9,520.80, marking the largest one-day fall in terms of percentage since March 30, 2009.
The broader Topix index lost 30.95 points, or 3.48 percent, to end at 859.21.
All 33 sectors on the Tokyo Stock Exchange lost ground, with the oil and coal products sector being the biggest loser, followed by mining and consumer finance.
A broad range of shares came under intense selling pressure as the safe-haven yen gained sharply against the ailing euro to the detriment of exporter shares, a key component of the TSE, brokers said. A strong yen erodes the overseas profits of Japanese exporters when repatriated.
Investors suffered a double whammy of weaker than expected U.S. nonfarm payroll data for May that chilled expectations for strength in the U.S. economy and the possibility of a Greek-style debt crisis in Hungary. A Hungarian official was reported Friday as saying state coffers were in critical condition.
“The debt crisis in Southern Europe is now feared to be spreading to Eastern Europe and that is a turnoff” for investors, said Masumi Yamamoto, equity market analyst at Daiwa Securities Capital Markets Co. “On top of that, the U.S. employment report proved to be disappointing, which is also a big reason (behind the selloff).”
The euro, already stung by debt worries related to Greece, Spain and Portugal, tumbled against the yen. The currency briefly hit an 8 1/2-year low just above the ¥108 line. The fall of the euro hit shares of exporters that rely on Europe for a relatively high proportion of their sales. Canon Inc. dropped ¥205, or more than 5 percent, to ¥3,675, and Sony Corp. lost ¥132, or nearly 5 percent, to ¥2,639. Nissan Motor Co. slid ¥31, or around 5 percent, to ¥634.
Fumiyuki Nakanishi, general manager at SMBC Friend Securities Co., said investors were caught off-guard by the talk of noneuro member Hungary facing a debt crisis similar to Greece and flocked to cut risky assets such as stocks. “After the euro came under selling pressure . . . and stocks fell sharply, we may see some buying from now. That said, the 10,000 line looks far away,” Nakanishi said as investor concern about the debt problems in Europe will likely weigh on the market.
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