Nikkei tumbles to two-month low on North Korea worries

The benchmark Nikkei average plunged to the lowest closing level in more than two months on the Tokyo Stock Exchange Wednesday, weighed down by the yen’s ascent and weaker U.S. equities amid growing geopolitical tensions over North Korea.

The 225-issue Nikkei average dived 257.30 points, or 1.29 percent, to close at 19,738.71, hitting its lowest finish since May 31. On Tuesday, the key market gauge lost 59.88 points.

The TOPIX index of all first-section issues ended down 17.42 points, or 1.07 percent, at 1,617.90, after falling 3.95 points the previous day.

Stocks stayed in negative territory from the outset of Wednesday’s trading, after the yen’s strengthening against the dollar and the overnight fall on Wall Street, triggered by U.S. President Donald Trump’s warning against provocative actions by North Korea.

The yen rose further after the reclusive nation’s state-run Korean Central News Agency said the country is considering striking areas around the U.S. Pacific territory of Guam, dealing an additional blow to sentiment in the Tokyo stock market, brokers said.

A broad range of stocks met with selling, but some including nonferrous metal makers and energy-related firms jumped as investors welcomed their brisk earnings, supporting the market’s downside to some extent, brokers said.

Although concerns over North Korea-related news weighed on stock markets at home and abroad, “it was only a cue” for investors to rush to sell stocks, said Masayuki Otani, chief market analyst at Securities Japan Inc.

“When the market is in a state of equilibrium, it can easily plunge at any time,” said Otani, noting that the Nikkei average was stuck in this state for some time, fluctuating around 20,000.

Wednesday’s fall in the Tokyo market came as investors took advantage of the North Korean worries, which broke the balance between supply and demand, Otani indicated.

Analysts agreed that it is a matter of time before the Nikkei starts rising again.

“In a few days to a few weeks, the market conditions will likely show improvements,” said Chihiro Ota, general manager for investment research and investor services at SMBC Nikko Securities Inc.

Otani took a similar view, predicting hat the Nikkei will attract buying on dips after hitting bottom at around 19,500.

Falling issues far outnumbered rising ones 1,657 to 287 in the TSE’s first section, while 78 issues were unchanged.

Volume rose to 2.06 billion shares from Monday’s 1.65 billion shares.

Semiconductor-related Sumco, optical equipment maker Olympus, Yokogawa Electric and Nippon Paint were hit by selling, after they announced disappointing earnings results or estimates.

By contrast, nonferrous metal producers Mitsubishi Materials and Sumitomo Metal Mining as well as oil company JXTG Holdings were upbeat on brisk earnings.

In index futures trading on the Osaka Exchange, the key September contract on the Nikkei average plunged 250 points to 19,730.

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