Nikkei posts biggest drop in 4 months on fears of U.S. rate hike – business

Tokyo shares ended sharply lower on Monday, with the benchmark Nikkei registering its biggest point drop since February 26 amid fears of a possible U.S. interest rate hike next year as a result remarks from a Federal Reserve official late last week.

The 225-issue Nikkei Stock Average ended down 953.15 points, or 3.29%, from Friday at 28,010.93, its lowest close since May 17. The largest Topix index of all issues in the first section of the Tokyo Stock Exchange finished at 47.11 points, or 2.42%, below 1,899.45.

All categories of industries lost ground, but air transport issues were a positive. The main declines were in rubber products, chemicals and insurance.

The US dollar slipped into the upper 109 yen level from the lower 110 yen range, with traders fleeing to the yen, seen as a safe-haven asset, after Tokyo stocks fell sharply amid concerns about the on the rise in rates, dealers said.

At 5 p.m., the dollar reached 110.02-04 yen against 110.19-29 yen in New York and 110.00-01 yen in Tokyo by 5 p.m. on Friday.

The euro was listed at $ 1.1883-1885 and 130.74-78 yen against $ 1.1863-1873 and 130.64-74 yen in New York and $ 1.1915-1916 and 131.07-11 yen in Tokyo late Friday afternoon.

The yield on the benchmark 10-year Japanese government bond fell 0.015 percentage points from nearly 0.040% on Friday as investors bought the debt after losses in the US Treasury market last week. Bond yields move in the opposite direction to prices.

Tokyo stocks lost ground throughout the day, with the Nikkei briefly losing more than 1,100 points, or more than 4%, after a decline on Wall Street late last week saw the Dow Jones Industrial Average collapsed to its lowest level this year.

The market took a hit after St. Louis Federal Reserve Chairman James Bullard said in an interview on Friday that a first interest rate hike could be seen as early as late 2022 following accelerating inflation, brokers said.

His comment was made after the Fed indicated last week following its policy meeting that it could hike interest rates in 2023, already earlier than expected, fueling concerns that stimulus packages would be also advanced.

“Investors overreacted to Mr. Bullard’s remarks because he was widely viewed as accommodating,” said Toshikazu Horiuchi, equity strategist at IwaiCosmo Securities, explaining that the global economy is on the road to recovery.

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The further decline in equities is expected to be limited, as the market is expected to be supported by the acceleration of the rollout of COVID-19 vaccination in Japan and improved results for U.S. and Japanese companies, some brokers said.

“The market is expected to be volatile throughout the week, with the Nikkei declining sustained at around 27,500,” said Yutaka Miura, senior technical analyst at Mizuho Securities.

On the first section, declining issues outnumbered advances from 2,044 to 123, while 26 ended unchanged.

Blue chip stocks fell sharply, with Fanuc losing 1,540 yen, or 5.6%, to 25,865 yen.

Softbank Group fell 275 yen, or 3.5%, to 7,559 yen, Tokyo Electron fell 1,990 yen, or 4.0%, to 47,570 yen, and Fast Retailing slipped 3,590 yen, or 4.4%, to 78,880 yen.

Main section trading volume fell to 1,301.08 million shares from 1,512.55 million shares on Friday.