Business / Financial Markets

Tokyo stocks plunge and yen surges amid rising Middle East tensions

Kyodo, AP

Japan’s markets have started 2020 on a rocky note, with stocks plunging and the yen surging against the dollar as escalating tension in the Middle East prompted investors to seek safe-haven assets.

The Nikkei 225 average briefly shed more than 500 points during Monday morning trading on the Tokyo Stock Exchange before closing at 23,204.86, down 451.76 points, or 1.91 percent, from Dec. 30, the last day of trading in 2019. The broader Topix, which covers all first-section issues on the TSE, ended Monday 1.39 percent, or 23.87 points, lower at 1,697.49.

The dollar briefly slid to a three-month low in the upper ¥107 level before fluctuating around the ¥108 line in the afternoon.

The Nikkei suffered its lowest close in about a month after a U.S. airstrike killed top Iranian commander Qassem Soleimani on Friday, leading Iran to vow retaliation.

U.S. President Donald Trump said Sunday on Twitter that “should Iran strike any U.S. person or target, the United States will quickly & fully strike back, & perhaps in a disproportionate manner.”

“Concerns grew that U.S.-Iran tensions will escalate further,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co. “The market became aware of the geopolitical risk in the region again.”

Brokers projected that the declining trend will last for a while, believing that few domestic investors will buy Tokyo shares as a sense of undervaluation has disappeared following their rally late last year.

The dollar fell to around ¥107.80 in the morning, a level not seen since early October. The yen’s firmness stoked worries over Japanese corporate profits, brokers said.

Other safe-haven assets, including gold and bonds, were also in demand. Gold futures jumped to a record high at the Tokyo Commodity Exchange and the yield on the benchmark Japanese 10-year government debt fell further into negative territory.

Worries about U.S.-Iran tensions lifted oil prices in Tokyo, with Middle East crude oil futures spiking to a seven-month high on the commodity exchange.

On the first section, declining issues outnumbered advancers 1,835 to 277, while 49 ended unchanged. Decliners included marine transportation, transportation equipment and air transportation issues.

Marine transportation issues took a hit after concerns over renewed U.S.-Iran tensions pushed up crude oil prices.

Mitsui OSK Lines Ltd. tumbled ¥127, or 4.2 percent, to ¥2,898. Kawasaki Kisen Kaisha Ltd. slumped ¥76, or 4.1 percent, to ¥1,787 while Nippon Yusen K.K. slid ¥57, or 2.9 percent, to ¥1,924.

On the other hand, oil refiners and explorers attracted buying on hopes that higher fuel prices would increase their profits. Inpex Corp. soared ¥46.50, or 4.1 percent, to ¥1,183. JXTG Holdings Inc. jumped ¥17, or 3.4 percent, to ¥514.90 and Idemitsu Kosan Co. was up ¥75, or 2.5 percent, at ¥3,105.

Automakers struggled due to the stronger yen. Honda Motor Co. plunged ¥92, or 3.0 percent, to ¥3,007, Mazda Motor Corp. lost ¥23, or 2.5 percent, to ¥915 and Toyota Motor Corp. was down ¥149, or 1.9 percent, at ¥7,565.

Nissan Motor Co. slid ¥10.60, or 1.67 percent, to ¥625.50 after former Chairman Carlos Ghosn jumped bail in Japan and fled to Lebanon late last month.

Shares also fell in most other Asian markets, apart from Australia. Asian economies depend heavily on oil from the Middle East, and oil prices surged.

The Shanghai Composite index gave up early gains despite a report that Chinese officials plan to visit Washington next week for the signing of a trade deal with Trump.