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Tokyo stocks tumble amid U.S. interest rate worries

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Tokyo stocks plunged Monday as concerns over U.S. interest rate hikes battered a market still reeling from the results of the U.S. Federal Reserve’s policy-setting meeting last week.

The 225-issue Nikkei average of the Tokyo Stock Exchange plummeted 953.15 points, or 3.29%, to finish at 28,010.93, after briefly sinking below the 28,000 line for the first in about a month. The key market gauge fell for the fourth straight trading session after a 54.25-point drop on Friday.

The Topix index of all first section issues gave up 47.11 points, or 2.42%, to end at 1,899.45, extending its losing streak to a third day following a 17.01-point loss the previous trading day. The index last closed below the psychological threshold of 1,900 on May 20.

The Tokyo market got off to a disastrous start after all three key U.S. market gauges tumbled on Friday, spooked by comments from a Fed official signaling earlier-than-expected interest rate hikes.

The comments came while the market was still sensitive to interest rate news after the Fed’s surprisingly hawkish Federal Open Market Committee meeting last week.

Falls in Chinese and other Asian stocks, as well as weakness in Dow Jones Industrial Average futures in off-hours trading, dampened market sentiment in the afternoon.

Market players were spooked after Jim Bullard, president of the Federal Reserve Bank of St. Louis, revealed that he was one of the officials at the FOMC who forecast an interest rate hike by 2022, Kazuo Kamitani, strategist at Nomura Securities Co., said. “The comments further fueled speculation of early rate hikes, especially as Bullard was considered a dove.”

Meanwhile, Hirohumi Yamamoto, strategist at Toyo Securities Co., said that selling was driven heavily by supply-and-demand factors.

“Usually, news of this sort would not push down the Nikkei by some 1,000 points,” Yamamoto said. “Some market players are increasingly becoming more bold in selling after the Bank of Japan decided earlier this year to curb exchange-traded fund purchases.”

Noting that the Tokyo market’s fundamentals have not changed, Yamamoto predicted that the latest setback will be short-lived.

Kamitani agreed, saying that the economic outlook in Japan is not dim as the Japanese economy is still in the process of achieving a recovery from the coronavirus crisis.

In the TSE first section, losers overwhelmed gainers 2,044 to 123 while 26 issues were unchanged. Volume decreased to 1.301 billion shares from Friday’s 1.512 billion shares.

Nikkei futures were actively sold, spurring falls in the key gauge’s heavyweight components such as Fast Retailing and Tokyo Electron, which closed down 4.35% and 4.02%, respectively.

Technology investor SoftBank Group was pushed down after news reports of Swiss banking group Credit Suisse dissolving a lending relationship with SoftBank Group Chairman Masayoshi Son.

Semiconductor-related issues such as Advantest and Shin-Etsu Chemical also succumbed to selling.

Airlines were the only rising sector, with JAL and ANA gaining 0.69% and 0.61%, respectively.

In index futures trading on the Osaka Exchange, the key September contract on the Nikkei average retreated 910 points to end at 28,020.

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