TOKYO – The Nikkei average hit a 16-month closing low on Wednesday, at a point more than 2 percent, as disappointment over the lack of political action in Japan to rein in the strong yen, which threatens a fragile economic recovery.
Hopes for action by the government and the Bank of Japan the yen, on a 15-year high on Tuesday increased, had provided early support after the Nikkei business daily reported that the Ministry of Finance unilateral yen-selling market intervention consider if speculators drive the yen.
* Lack of Japan policy on the yen weighs on Nikkei
* Nikkei next goal is to 8697, 61.8% retracement
* Nikkei slow stochastic, both RSI oversold
* 9000-level, strong resistance analyst
But those hopes disappeared gradually as the day progressed, with no signs of a new policy moves, while a series of statements by Finance Minister Yoshihiko Noda had little effect.
Noda, who met with Prime Minister Naoto Kan and Chief Cabinet Secretary Yoshito Sengoku, said he received no special instructions from May to issues of currency, adding that he could not comment on the likelihood of Japan to intervene in forex markets.
Nikkei slightly compared to losses at the end of trading, though, after the government sources said Japan had not ruled out forex intervention as a policy option.
“There are many reports hinted that something would happen to the BOJ, and many explanations, but the feeling is growing market,” Just Do It ‘, “said Koichi Ogawa, portfolio manager at Daiwa SB head Investments.
“The consensus is that solo performance may not be much of an impact, but investors continue to expect something – and all we have is talk.”
The benchmark Nikkei. N225 shed 1.7 percent to 8845.39, its lowest close since late April 2009, although still well over 26 years closing low hit just over 7000 in March 2009. The broader Topix. TOPX lost 1.3 percent to 807.31.
The Nikkei lost 3.6 percent so far this week.
The dollar recovered some ground to 84.34 JPY = on electronic trading platform EBS after hitting a 15-year low of 83.58 yen the previous day. [FRX /]
Market players said the longer it took for the Nikkei to recover over 9000, which has long served as an important support level, the outlook was gloomy.
The benchmark Nikkei broke below 9000 on Tuesday for the first time since May 2009. The 9000-9100 area had been strong support since last year, and market participants said that some technical objectives for the benchmark fall break.
“The fact that the Nikkei has broken out among the 9000, since that very strong support for a while, is a major event and it is urgent that the Japanese authorities to take measures,” said Koichi Nosaka, a market analyst at Securities Japan Inc.
“If the index remains below that level for too long will eventually become 9000 strong resistance.”
Some market players said speculative selling of Nikkei futures has contributed to lower the benchmark, and while there was talk of buying at the lows of the pension funds was difficult to confirm.
By a number of technical measures, the Nikkei also starting to look oversold and perhaps to a bit of a rebound.
The relative strength index (RSI) fell to 32, 30 and considered oversold, while the slow stochastic fell deeper into oversold territory. The Nikkei also fell through the lower Bollinger Band.
GROWING pessimism
However, pessimism about the global growth of infectious become in recent weeks after lackluster U.S. employment and consumer reports. Fears were reinforced on Tuesday by a report showing U.S. existing home sales slid more than expected in July after the government last home buyer tax credits. [ID: nLDE67N1O6]
“There are a lot of important indicators are, and bad figures, the probability that the Federal Reserve with a kind of policy steps to increase,” said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities Morgan Stanley.
Honda Motor Co. (7267.T) and other exporters slipped.
Many Japanese exporters have their exchange rate assumptions yen about 90 per dollar for the fiscal year in March next year, although Honda cut the assumption of 90 yen to 87 yen. A stronger yen eats into exporters of profits when repatriated.
Honda lost 3.1 percent to 2718 yen, TDK Corp. (6762.T) shed 3.2 percent to 4240 yen and stepper maker Nikon Corp. (7731.T) fell 2.6 percent to 1372 yen.
Among other notable stocks, Nippon Sheet Glass (5202.T) fell 5 percent to 189 yen after it said it would sell up to 49 billion yen (576 million U.S. dollars) of new shares to raise funds for boosting production glass for emerging economies.
The offer will increase the number of shares outstanding by 35 percent. [ID: nTOE67N04B]
Trade picked up, with some 1.78 billion shares changing hands on the first section of the Tokyo exchange, the highest volume in about two weeks.
Declining stocks outnumbered advancing ones by nearly 3 to 1.
source:reuters
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