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Japan Stocks Drop on Stronger Yen as Energy Shares Fall With Oil

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Japanese yen

Japanese stocks fell as the yen strengthened and Iran and Saudi Arabia doused hopes for a rebound in crude prices, sending global energy shares lower.

The Topix index declined 1.1 percent to 1,276.57 as of 9:53 a.m. in Tokyo, as 27 of the measure’s 33 industry groups slid. The Nikkei 225 Stock Average lost 1.2 percent to 15,856.77. Shares in the U.S. tumbled with oil after Saudi Arabia said a recent agreement to freeze output won’t lead to production cuts, while Iran called the deal “ridiculous.”

“Iran and Saudi Arabia are showing little desire to lower production, so despite the agreement by the main countries to freeze output, it’s clear that alone won’t push oil prices back up to $50 or $60 a barrel,” Chihiro Ohta, general manager of investment information at SMBC Nikko Securities Inc. in Tokyo, said by phone. “There are no catalysts to purchase stocks now. We’re not seeing buying ahead of the G20 either.”

Crude fell 4.6 percent in New York on Tuesday. Last week’s proposal to cap output at January levels puts “unrealistic demands” on Iran, the country’s oil minister said Tuesday. Saudi Arabia’s oil minister said the deal won’t cut oil production as other countries would be unlikely to assist in restraining output. Oil futures continued falling, slipping an additional 1.5 percent on Wednesday.

Yen, Oil

The yen gained for a second day, trading at 111.98 per dollar after jumping 0.7 percent on Tuesday. That sent exporters lower, including Toyota Motor Corp. which declined 1.6 percent. Subaru manufacturer Fuji Heavy Industries Ltd. lost 3.4 percent, while TDK Corp., the Apple Inc. supplier that gets more than 90 percent of revenue abroad, fell 4.1 percent.

Shippers led losses in Tokyo on Wednesday, with Mitsui OSK Lines Ltd. falling 3.3 percent. Resource-related shares were also among the biggest losers. Nippon Steel & Sumitomo Metal Corp. dropped 3.3 percent after gaining 4 percent on Tuesday.

Declines among Japan’s energy companies were buffered as several brokerages lifted ratings on some companies. Fuji Oil Co. jumped 1.2 percent after Mitsubishi UFJ Morgan Stanley Securities Co. boosted its outlook on the crude miner and refiner. Chiyoda Corp., which provides services to oil companies, rose 0.1 percent after Credit Suisse Group AG raised its rating on the firm.

Chairman Exit

Honda Motor Co. led car manufacturers lower after shaking up management, including the exit of its chairman. The changes at Japan’s second-largest automaker come amid internal quality woes and an air-bag safety crisis with its top supplier Takata Corp. Shares of Honda fell 3.3 percent.

E-mini futures on the Standard & Poor’s 500 Index slipped 0.1 percent after the underlying equity gauge tumbled 1.3 percent on Tuesday, the most since Feb. 8. The recent rally’s strongest performers lost momentum, with banks and tech shares declining. Economic data was mixed, as a report showed previously owned home sales unexpectedly rose in January to the second-highest pace since early 2007, while February’s consumer confidence decreased.

Investors awaited the start of a Group of 20 meeting on Friday in Shanghai. The weakening global-growth outlook was expected to dominate the agenda as officials from the world’s biggest economies gathered.

Bloomberg

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.