Japanese shares close down 2% ahead of Fed decision

Japanese shares close down 2% ahead of Fed decision
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First Published: Tue, Sep 18 2007. 11 54 AM IST
Updated: Tue, Sep 18 2007. 11 54 AM IST
AFP
Closing
Tokyo: Japanese share prices closed down 2% on Tuesday, 18 September, as buyers took to the sidelines ahead of a key US interest rate decision, dealers said.
They said investors were nervous about the fallout from a global credit squeeze after British bank Northern Rock was forced to seek a central bank bailout due to financial difficulties.
The Tokyo Stock Exchange’s benchmark Nikkei-225 index of leading shares fell 325.62 points or 2.02 percent to 15,801.80.
The broader Topix index of all first-section shares dropped 33.76 points or 2.19 percent to 1,510.95.
Morning
Tokyo: Japanese share prices slumped 1.77% in morning trade Tuesday, 18 September, as investors waited for a key US interest rate decision, dealers said.
They said investors remained jittery about the fallout from problems in the US mortgage sector, particularly in light of the financial woes of British bank Northern Rock which has fallen victim to the global credit squeeze.
The Tokyo Stock Exchange’s benchmark Nikkei-225 index of leading shares fell 286.11 points to 15,841.31 by lunch, giving up most of Friday’s gains.
The broader Topix index of all first-section shares dropped 27.80 points or 1.8% to 1,516.91.
Decliners overwhelmed gainers 1,228 to 372, with 95 issues unchanged.
Turnover fell to 725.7 million shares from 1.46 billion Friday morning.
The thin trading volume reflected investor caution ahead of the Federal Reserve meeting later Tuesday at which the central bank is expected to cut interest rates by at least a quarter point, dealers said.
Many investors are hoping for a half-point cut to bolster the US economy in the face of a housing slump and recent financial market instability.
“Unless the Fed lowers its federal fund rates by 50 basis points or indicates successive rate cuts, the market may remain weak,” said Kazuhiro Takahashi, equity general manager at Daiwa Securities SMBC.
“Although cutting interest rates will not solve the credit tightening problem, the central bank needs to show it is taking measures to resolve the problem,” he said.
Concerns about the fallout from the US mortgage sector problems grew after British mortgage lender Northern Rock was forced to seek an emergency bailout by the Bank of England as customers rushed to withdraw their savings.
“Once US investment banks release their earnings, the impact of the subprime market trouble will become clearer and the market may start regaining confidence. But if European shares decline, it will affect Japanese shares,” Takahashi said.
Major US investment banks are due to report their quarterly earnings this week.
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First Published: Tue, Sep 18 2007. 11 54 AM IST
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