Business / Financial Markets | TSE DATA & REPORT

Nikkei stocks weighed down by geopolitical risks

Stocks came under heavy selling pressure Friday, bruised by mounting geopolitical risks in Ukraine and the Middle East.

The Nikkei 225 average closed down 154.55 points, or 1.01 percent, at 15,215.71. On Thursday, the key market gauge sagged 9.04 points. The Topix lost 10.09 points, or 0.79 percent, to close at 1,263.29, after falling 0.21 point the previous day.

Both indexes extended their losing streak to a third session.

The Tokyo market was hit by massive selling from the outset of Friday’s trading after the Dow Jones industrial average turned sharply lower overnight due to geopolitical risks after a Malaysian Airlines jet crashed in eastern Ukraine and the Israeli military launched a ground offensive in Gaza, both on Thursday.

Risk-averse sentiment was fueled by the likelihood that the aircraft was shot down by a missile, brokers said.

The Nikkei average plunged nearly 260 points in early morning trading as mainstay issues, such as automaker Toyota and clothing retailer Fast Retailing, briefly tumbled over 2 percent.

After the initial selling ran its course, however, the key indexes showed some resilience, with the market’s downside underpinned by buying on dips mainly by individual investors, brokers said.

Position-adjustment selling prior to a three-day weekend in Japan also dampened stock prices, brokers said. The Tokyo market will be closed Monday for a national holiday.

Still, “the Nikkei average rebounded to around 15,200 thanks to short covering. Investors bought back some of the stocks they had sold in the morning,” said Yutaka Miura, senior technical analyst at Mizuho Securities Co.

Investors retreated to the sidelines because they need to figure out how the geopolitical risks will have an impact on the global economy, an official at a major securities firm said.

The risks could push up crude oil prices, foster risk-averse sentiment and eventually lead to an appreciation of the yen, which would be negative for export-oriented companies in Japan, brokers said.

However, Miura said: “I believe investors have priced in the geopolitical risks in the short term. I don’t think the situation will get worse in a way that would possibly lead to a military conflict between Russia and Ukraine.”

Falling issues overwhelmed rising ones 1,427 to 289 in the TSE’s first section, while 99 issues were unchanged.

Volume sank to 1,843 million shares from Thursday’s 2,285 million shares.

Export-oriented names, including automaker Toyota, Honda and Mazda, as well as tire maker Bridgestone and air conditioner manufacturer Daikin Industries, met with selling as the yen strengthened against other major currencies.

Heavily weighted components of the Nikkei average, including clothing retailer Fast Retailing, mobile carriers Softbank and KDDI, lost ground.

On the other hand, a handful of winners included railway operator JR East, electronics firm Fujitsu and sanitary goods maker Unicharm.

Yaskawa Electric soared 4.37 percent after the company revised up its April-September earnings forecast, brokers said.

In index futures trading on the Osaka Exchange, the key September contract on the Nikkei average plunged 160 points to end at 15,210.