Business / Financial Markets

Tokyo stocks plunge on first trading day of 2019

Bloomberg, AFP-JIJI, Kyodo

Stocks tanked on the first trading day of the new year as Apple Inc.’s outlook warning helped spark global growth concerns, sending technology shares tumbling.

The blue-chip 225-issue Nikkei average closed 2.26 percent, or 452.81 points, lower at 19,561.96, after briefly dipping more than 3.8 percent to 19,241.37, as it was catching up with other markets after the New Year’s break.

The broader Topix index lost 1.53 percent, or 22.93 points, to 1,471.16.

Since the previous session in Tokyo on Dec. 28, heavy selling has hit global markets.

“Players were trying to catch up with the downward trend following the long New Year’s holidays,” said Shinichi Yamamoto, a broker at Okasan Securities.

On Wall Street on Thursday, stocks plunged as China’s slowing economy forced Apple to slash its revenue forecast.

Sentiment in the United States was further dented by Institute for Supply Management data showing U.S. manufacturing activity at a two-year low.

The weak data was “more proof, if needed, that President (Donald) Trump’s trade actions against China are now hurting the U.S. as much as they are China,” said Ray Attrill, head of foreign-exchange strategy and markets at National Australia Bank.

It is “more reason to think a Sino-U.S. trade deal is in the offing in coming weeks,” he said in a note.

Seiichi Suzuki, senior market analyst at Tokai Tokyo Research Institute, said the strong yen dampened sentiment greatly as it clouds the outlook for Japanese exporters.

“Investors here hate the yen’s appreciation, which exacerbated today’s drop,” Suzuki said, while noting many market players had yet to come back from their holidays.

“Some people may say today’s trade indicates the course of trade this year, but you should take it with a pinch of salt,” he said.

In afternoon trading, the dollar edged up against the yen as the Bank of Japan, the Finance Ministry and the Financial Services Agency held an emergency meeting following the yen’s surge.

“We must acknowledge this with strong concern,” Masatsugu Asakawa, the vice finance minister, told reporters after the meeting, warning Tokyo is ready to take “appropriate measures” if necessary.

The emergency meeting was the third since Dec. 20, and these have come amid turmoil in the financial markets that has seen sharp drops in Tokyo stock prices and long-term interest rates falling into negative territory. The meetings aim to calm anxiety among market participants by showing the close cooperation among the financial and currency authorities.

The yen briefly hit 104.70 to the dollar, its highest since March 2018, on Thursday while Japanese traders were away for the New Year’s holidays.

A stronger yen generally hurts Japanese exporters by making their products less price competitive abroad and shrinking their overseas earnings.

“We will continue to stringently monitor (financial markets) for such speculative moves,” Asakawa, Japan’s top currency diplomat, said.

“Excessive volatility isn’t conducive to economic and financial stability, as the Group of Seven and the Group of 20 have affirmed. We have repeatedly confirmed that our currency authorities will cooperate as necessary, and Japan will act in line with that understanding,” he said.

In the U.S., Apple late on Wednesday cut its revenue outlook for the latest quarter, citing steeper-than-expected “economic deceleration” in China and emerging markets, factors that have contributed to sharp falls across stock markets since late last year.

Apple’s warning contributed to a rally by the yen, which tends to benefit from a “flight to safety” when investor anxiety is high.

In Tokyo trade, Nintendo plunged 4.28 percent to ¥28,030 as Sony lost 2.70 percent to ¥5,182.

Automakers were also among losers. Toyota lost 0.93 percent to ¥6,346 as Honda fell 0.41 percent to ¥2,882.5, with Nissan down 1.19 percent at ¥869.8.