Plunging oil prices and escalating coronavirus fears rattled Tokyo’s financial markets Monday, sending the Nikkei stock average to a 14-month low and the dollar briefly to near ¥101 — its lowest since November 2016.
The 225-issue Nikkei average dived 1,050.99 points, or 5.07 percent, from Friday’s close to end at 19,698.76, its lowest close since Jan. 4, 2019. The broader Topix index of all first section issues on the Tokyo Stock Exchange sank 82.49 points, or 5.61 percent, to 1,388.97.
Every industry category lost ground, led by mining, oil and coal products, and iron and steel issues.
Amid concerns the coronavirus is shocking an already weakened global economy, investors continued to seek assets perceived as safe havens, such as the yen and government bonds.
“Markets are screaming that there is a pending recession,” said Stephen Miller, an adviser at GSFM, a unit of Canada’s CI Financial Group. “People can’t seem to get enough of the likes of yen and gold, and dumping the Aussie and commodity currencies that are vulnerable to global growth risks.”
The yen surged on safe haven demand as an oil-price war worsened the virus-driven crisis in global markets.
The slide in oil has triggered stop-loss selling on high-yielding emerging-market currencies including the Mexican peso, said Hideki Shibata, senior rates and currencies strategist at Tokai Tokyo Research Institute Co.
“That’s accelerating gains in the yen,” he said.
A Finance Ministry official said the government is monitoring markets with a sense of urgency
“The yen’s surge won’t stop unless Japanese authorities start to talk it down,” said Masakazu Satou, a currency adviser at retail FX brokerage Gaitame Online in Tokyo. “The market is very concerned over the spreading of the virus in the U.S. — the yen’s uptrend will pick up momentum if it breaks through 100 against the dollar.”
At the Tokyo Commodity Exchange, Middle East crude oil futures saw a flood of sell orders that pushed down the benchmark price more than 30 percent from Friday to its lowest level in about four years at one point.
As infection cases in Italy surged to over 7,300, the government ordered Sunday a large-scale lockdown in the northern part of the country, including Milan. The situation also worsened in the United States, with New York declaring a state of emergency.
“A risk-off mood strengthened in the financial markets and a plunge in oil prices added to sluggish sentiment, triggering investor fears that the New York Dow will drop sharply again tonight,” said Yutaka Miura, senior technical analyst at Mizuho Securities Co.
“I think the Nikkei’s decline will stop at around the 19,000 level, while the market is expected to see high volatility in the near future,” Miura said.
Export-related issues such as automakers were hit by the stronger yen, which cuts their overseas profits when repatriated.
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