Tokyo stocks dropped further Thursday amid continuing bearish sentiment stemming from rising U.S. inflation worries.

The 225-issue Nikkei average of the Tokyo Stock Exchange plummeted 699.50 points, or 2.49%, to finish at 27,448.01, closing below the psychologically important threshold of 28,000 for the first time since Jan. 29. The key market gauge tumbled 461.08 points Wednesday.

The Topix index of all TSE first section issues ended 28.91 points, or 1.54%, lower at 1,849.04, following a 27.97-point drop the previous day.

The market met with selling from the outset, after all three major U.S. stock market gauges extended their losses on Wednesday. A faster-than-expected rise in the U.S. consumer price index for April, announced the same day, incited investors’ worries over a possible shift in the Federal Reserve’s monetary easing policy.

Leading to the Nikkei average’s sizable decline was the weakness of some heavyweight components, including tech investor SoftBank Group and other technology-oriented names, which reflected a plunge in the tech-heavy U.S. Nasdaq composite index the day before.

The Tokyo market continued to fall further in the afternoon, despite a rise U.S. Dow Jones futures in off-hours trading.

Meanwhile, bargain-hunting, mainly of financials and cyclical stocks, underpinned the Tokyo market’s downside throughout the day, brokers said.

Hirohumi Yamamoto, strategist at Toyo Securities Co., said, “Some short-term investors refrained from buying on the dip amid rising anxiety.” He added that the Tokyo market’s recent sharp falls are also attributable to the absence of large-lot buying by institutional investors.

“Mounting concerns that the Fed might end its ultralow interest rate policy prompted investors to take to position-squaring selling,” said Yoshihiko Tabei, chief analyst at Naito Securities Co.

Maki Sawada, strategist at Nomura Securities Co., said that investors rushed to sell stocks of companies that have been benefiting from the virus crisis to lock in gains. “The market is unlikely to turn into a long-term downward trend,” she added.

On the TSE first section, decliners outnumbered gainers 1,800 to 335 while 57 issues were unchanged. Volume dropped to 1.408 billion shares from Wednesday’s 1.529 billion shares.

SoftBank Group fell sharply, by 7.77%, down for the third straight session.

Among tech stocks, semiconductor-related Advantest and TDK dropped 4.92% and 3.10%, respectively.

Automaker Toyota fell 1.54% after attracting buying on Wednesday.

Other losers included medical information provider M3 and optical equipment-maker Olympus.

Meanwhile, retail giant Seven & I soared 4.97%, following a media report that activist U.S. shareholder ValueAct Capital has acquired a 4.4% equity stake in the Japanese company.

Asahi Kasei surged 5.11% after the chemical-maker said on the day that it expects its operating profit for the year ending in March 2022 to grow 10.6%.

Among other winners were daily goods producer Kao and departments store operator Marui.

In index futures trading on the Osaka Exchange, the key June contract on the Nikkei average retreated 660 points to end at 27,480.

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