Tokyo: Japanese stocks tumbled to a one-week low on 2 November after sharp losses on Wall Street sparked by renewed credit fears hit bank shares, with a stronger yen undercutting exporters such as Honda Motor Mitsubishi UFJ Financial Group and other financial stocks were especially battered by poor sentiment carried over from US trade, which saw downgrades of banking giants Citigroup and Bank of America.
Both the Nikkei and the TOPIX fell more than 2% before on what market participants said was inevitable spillover from overseas trade and the re-emergence of worries about fallout from the subprime loan crisis. They later recovered slightly.
“Japanese banks don’t appear to have much exposure to the subprime loans, but what happens with financial institutions in the US and Europe, where earnings are being reported, will keep the financial sector volatile,” said Takahiko Murai, general manager of equities at Nozomi Securities.
“Aside from company earnings reports, there aren’t a lot of domestic trading factors, so this will of course have an impact.”
The Standard & Poor’s 500 Index saw its biggest percentage point drop since 9 August -- the day French bank BNP Paribas spooked global markets by freezing three funds that had invested in US subprime mortgages. It fell 2.64% to 1,508.44.
Though the yen weakened slightly against the dollar during Tokyo trade, it still retained part of the gains made on Thursday as the plunge in US shares dampened investor risk appetite, and this led to selling of exporters, weighing on the overall market.
But investors sought out firms that have reported good results, with Konica Minolta Holdings rising 5% on strong first-half results announced on Thursday.
The number of firms reporting earnings will ease a bit on Friday but will include Mazda Motor and Casio Computer.
The benchmark Nikkei average ended the morning session down 1.71% at 16,581.27 after falling as low as 16,484.54 -- its lowest since 26 October.
It roughly tracked other Asian stocks, as shown by MSCI’s measure of other Asia Pacific stocks, which at 0242 GMT was down 1.68%.
The broader TOPIX was down 1.57% at 1,610.11.
Citigroup shares plunged nearly 7%, its biggest daily drop in five years, after brokers downgraded the largest US bank, and Japanese banks suffered as a result.
Mitsubishi UFJ was down 4.7% at 1,067 yen and Sumitomo Mitsui Financial Group also fell 4.7%, to 880,000 yen. Mizuho Financial was close behind with a slide of 4.4% to 616,000 yen.
“The US bank situation has renewed worries about how well the subprime problem has been dealt with. People were probably a bit too optimistic,” said Yutaka Miura, senior technical analyst at Shinko Securities.
Exporters also were hit, with Honda down 3.4% at 4,230 yen. Canon Inc slipped 2.4% to 5,820 yen and Sony Corp was down by 0.9% at 5,780 yen.
“Given that these companies tend to lead the market, their losses contributed to an overall drop today,” said Murai at Nozomi Securities.
There were some bright spots, with the standout being Konica Minolta, up 5% at 2,140 yen after it posted a 23% rise in half-yearly operating profit on robust sales of its multifunctional printers and flat TV components.
Yamada Denki Co Ltd rose 3.2% to 12,480 yen after Goldman Sachs raised its rating to “buy” from “neutral”, citing strong earnings momentum expected for Japan’s top consumer electronics retailer. Reuters