Nikkei plunges 2% on Wall Street weakness, weak oil prices

Japan’s Nikkei share average fell 2.0 per cent on Tuesday after a long week-end as declines in US stocks and weakening oil prices dampened the risk appetite, while a strong yen hurt exporters.

By mid-morning, the Nikkei was at 16,849.34, nearing its one-month low of 16,672.94 hit on December 17. On Friday, it had gained 0.2 per cent.

Retail shares weighed. Aeon Co tumbled 5.9 per cent to a one-month low after it reported that its operating profit fell 48 per cent in the March-November period from a year earlier. Seven & i Holdings dropped 3.1 per cent after posting a worse than expected profit for the March-November period.

Investors in Japan returned to the market on Tuesday after a three-day week-end to find US shares had been battered, oil prices had slid further and the yen had risen.

Analysts said that last week the market had briefly taken comfort from a halt in sliding oil prices, but prices had once again begun to fall. Goldman Sachs has slashed its short-term price forecast for crude.

“Today’s drop is due to negative news accumulated during the long week-end,’’ said Takuya Takahashi, an analyst at Daiwa Securities.

“Even US jobs data were mixed, and US earnings wasn’t good.’’

US jobs growth

US job growth increased briskly in December, but wages posted their biggest decline in at least eight years as the tighter labour market has yet to give much of a boost to workers.

For US earnings, Tiffany & Co cut its full-year profit forecast, citing a disappointing holiday shopping season.

Next fiscal budget

Meanwhile, investors digested week-end news that the Japanese government will propose a record budget for next fiscal year of more than $ 800 billion but cut borrowing for a third year, as Prime Minister Shinzo Abe seeks to maintain growth, while curbing the heaviest debt burden in the industrial world.

Exporters were hit as the dollar dropped to 117.72 yen, the lowest since December 17. Toyota Motor Corp dropped 2.8 per cent, Honda Motor Co fell 1.5 per cent and Sony Corp declined 4.2 per cent. Index-heavy stocks also dropped, with Fast Retailing Co falling 2.3 per cent and SoftBank Corp dropping 2.4 per cent.

The broader Topix shed 1.8 per cent to 1,356.20, and the new JPX-Nikkei Index 400 fell 1.7 per cent to 12,287.35.

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