Nikkei falls after weak JGB auction sours mood; global growth concerns weigh

* Investors concern that bond holders may unwind positions – analyst * Airlines, rubber product makers fall on a rebound in oil prices By Ayai Tomisawa TOKYO, Feb 3 (Reuters) – Japanese stocks extended early losses and fell to a 1-1/2-week low on Tuesday as the results of the new 10-year Japanese government bonds auction were weaker than expected, with worries about global growth also weighing on risk appetite.

The Nikkei share average ended 1.3 percent lower at 17,335.85 points, its lowest close since Jan. 22.

The Ministry of Finance’s auction of 2.4 trillion yen 10-year JGBs drew unexpectedly weak demand, producing the lowest accepted price of 99.42, compared to market expectations of around 100.00.

“The auction results triggered worries that those who have long positions on bonds may unwind their positions and have a big impact on other asset classes,” said Nobuhiko Kuramochi, a strategist at Mizuho Securities.

Market participants also said that sentiment for global growth has been sour, with the European Central Bank recently easing policy and, in the latest move, the Reserve Bank of Australia cutting interest rates to a record low on Tuesday.

“After the Bank Of Japan eased monetary policy last fall, central banks around the world have followed suit. While it is seen unlikely that the BOJ will ease further any time soon, people may find little reason that the yen will weaken further,” Mizuho’s Kuramochi said.

Index-heavy stocks were lower, with Fast Retailing Co falling 2.0 percent and KDDI Corp dropping 2.9 percent. The companies together took a hefty 51.9 points from the Nikkei benchmark.

Disappointing U.S. data on Monday also weighted on the mood.

The pace of growth in the U.S. manufacturing sector slowed more than expected in January, and U.S. consumer spending recorded its biggest decline since late 2009 in December, with cheaper gasoline not translating into higher activity.

Airline companies and rubber product makers, which are beneficiaries from weak oil prices in the past few months, continued to drop after oil prices rose strongly again on Monday. Oil prices have rebounded 11 percent over the last two straight sessions.

Japan Airlines dropped 5.2 percent, and ANA Holdings fell 1.6 percent.

Bridgestone Corp dipped 3.3 percent and Yokohama Rubber shed 2.4 percent.

The broader Topix shed 1.2 percent to 1,392.39 and the JPX-Nikkei Index 400 declined 1.1 percent to 12,640.20.

(Editing by Kim Coghill)

Nikkei Futures

nikkeifutures.org@imediaone.com

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