Nikkei falls on Fed rate hike view

Stocks fell sharply Thursday, weighed down by a tumble on Wall Street overnight and a rise in the yen.

The Nikkei 225 average lost 189.51 points, or 1.06 percent, to end at 17,606.22. On Wednesday, the key market gauge gained 27.43 points.

The Topix closed down 16.34 points, or 1.14 percent, at 1,413.58 after climbing 3.54 points Wednesday.

A wide range of issues met with selling from the outset after the Dow Jones industrial average plunged more than 1 percent Wednesday.

An increasing number of investors came to believe that the U.S. Federal Reserve will move ahead with an interest rate hike by the end of this year, possibly as early as June. This sentiment emerged after the Fed upgraded its economic assessment following a two-day meeting of its policy-setting Federal Open Market Committee through Wednesday.

In addition, the yen’s ascent in early morning trading induced selling of Tokyo stocks, brokers said.

The TSE showed resilience toward the morning close thanks to growing hopes for improved earnings at Japanese companies, brokers said.

In the afternoon, however, stocks again came under selling pressure, led by falls in index futures, and extended losses toward the close due to the yen’s renewed strengthening.

“Although no particular market-moving factors emerged, investors sold stocks after the market cut losses too sharply in the late morning session and the early afternoon” despite falls in Asian markets, said Ryuta Otsuka, strategist at the investment information department of Toyo Securities Co.

Investors are concerned over short-term overheating, brokers said. The Nikkei rose more than 900 points in about two weeks through Wednesday.

But Otsuka noted that hopes remain high for improved corporate earnings, as indicated by gains among companies that posted brisk earnings.

An official of a major securities firm said more investors will likely be encouraged to buy on dips amid an improving supply-demand balance thanks to the Bank of Japan’s buying of exchange-traded funds and expectations for stocks purchases by the Government Pension Investment Fund.

Falling issues far outnumbered rising ones 1,357 to 420 in the first section, while 86 issues were unchanged.

Volume grew to 2.413 billion shares from 2.312 billion Wednesday.

Nintendo dived 8.66 percent after the game maker on Wednesday lowered its consolidated operating profit estimate for the year through March.

Camera-maker Canon shed 5.11 percent as investors grew cautious about a further ascent of the yen against the euro, brokers said.

Skymark Airlines met with heavy sell orders and plummeted 25.24 percent before the stock’s delisting from the TSE in March following the company’s filing for bankruptcy protection on Wednesday.

Shipbuilder Kawasaki Heavy cut earlier losses to end higher on a brisk earnings report for April-December that was released Thursday afternoon.

FujiFilm surged after announcing Wednesday an upward revision to its operating profit estimates for the current fiscal year.

In index futures trading on the Osaka Exchange, the key March contract on the Nikkei average tumbled 240 points to finish at 17,610.

Nikkei Futures

nikkeifutures.org@imediaone.com

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