Japan's Nikkei Index Drops Overnight, Nears Bear Market Territory
Japan's benchmark Nikkei Index dropped a whopping 3.72 percent overnight, the fourth daily loss in eight trading days, as the index nears bear market territory after gaining over 60 percent in the past year. The index had been climbing on speculation that the Bank of Japan's new "2-2-2-2" program alongside fiscal stimulus would help to jump start the Japanese economy, which has been on life support for three decades.
Declines in Japan were led by exporters and banking giant Nomura, which fell 8.4 percent, as the yen strengthened against the U.S. dollar. The broader Topix Index lost 3.4 percent overnight with all 33 industry groups posting declines in a broad-market rout.
Japanese exporters saw large declines overnight as the outlook for future earnings worsened as the yen strengthened against the U.S. dollar. The USD/JPY rate fell to 100.24 after rising over 103 as late as last week. The stronger yen is also a sign that the market is becoming more skeptical of government stimulus programs.
The Topix Index posted its first monthly loss in May since August, a decline of 2.5 percent. Also, the index is down a massive 14 percent since posting a 5-year high on May 22.
Softbank shares slid 4.8 percent overnight as ISS, the large shareholder advisory firm, issued a statement in opposition of the company's proposed takeover of Sprint (NYSE: S). Toyota Motor Corp. (NYSE: TM) shares declined 3.3 percent in Tokyo trading while U.S. listed ADR's declined 1.95 percent pre-market. Toyota, along with other global car-makers, is set to issue its May vehicle sales report Monday.
The benchmark Nikkei Index also dropped overnight with declines now totaling 15 percent from the recent high made also on May 22. Fast Retailing Co., which accounts for about 10 percent of the Nikkei Index, declined 6.3 percent overnight, dragging the broad index lower.
Japanese equities are still the best performing among the major developed markets this year, with the Topix and Nikkei 225 up about 28 percent. Shares have rallied since mid-November on optimism the government of Prime Minister Shinzo Abe in league with the Bank of Japan will beat 15 years of deflation.
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