Tokyo: Japan’s benchmark Nikkei average hit a new 17-month low on Monday, beaten down by fresh worries about the US economy that sent Wall Street tumbling and prompted investors to sell chip shares.
Friday’s release of poor US jobs data stoked worries that the world’s largest economy might be heading into recession, though a sharp slide of Japanese shares on Friday plus factoring in of the jobs data helped limit Tokyo’s Monday fall.
US chip shares had been especially hard hit on fears that businesses are unlikely to upgrade computer equipment in the face of an economic slowdown, and this dragged down Japanese semiconductor-related shares such as Tokyo Electron
Despite the emergence of bargain hunters and defensive buyers who boosted shares such as drugmaker Eisai Co Ltd, the Nikkei has shed roughly 5.4% in the first two trading days of 2008, and sentiment remained gloomy.
Market participants said the Nikkei was depressed by the double punch of Wall Street’s slide and the weak dollar, which despite edging up from a six-week low still hovered around 109 yen — below the rate of 110 yen to the dollar assumed by many exporters. “Though the market is watching to see what happens on Wall Street tonight for direction, even a rise in the Dow of 200 points won’t buoy the Nikkei unless the yen weakens,” said Masayoshi Okamoto, head of dealing at Jujiya Securities.
“We’re seeing some bargain-hunters buying at around the 14,500 level, but the topside remains extremely heavy.” In the wake of Friday’s Wall Street tumble, which saw the Dow Jones industrial average fall by more than 200 points, investors were pinning their hopes on a short-term technical rebound and fresh US economic policy steps.
The Nikkei 225’s 14-day relative strength index is now at about 26.5, below the 30 “oversold” line, which usually indicates limited downside in the near term.
Bush said in a Reuters interview on Thursday that his administration was considering whether to craft an economic stimulus package. “More needs to be done than just another interest rate cut by the Federal Reserve — much broader policies, perhaps even a tax cut. Something like that would really reassure markets,” said Masayoshi Yano, senior manager of investment information, at Tokai Tokyo Securities.
“Though the market did come off its lows today, the return is limp and it still isn’t the kind of environment to really buy.”
The benchmark Nikkei was down 1.3% to 14,500.55, shedding 190.86 points. It earlier slid as low as 14,438.41, its lowest since July 2006.