Japan’s Nikkei Falls More Than 3% On Chips, Middle East Concerns
Japanese stocks fell, with the Nikkei 225 Stock Average down over 3% and inching toward a technical correction.
(Bloomberg) -- The Nikkei 225 Stock Average was headed for a technical correction amid a global selloff in stocks as the outlook for US interest rates and tensions in the Middle East spooked investors.
The Nikkei declined as much as 3.5%, putting it 10% below its all-time high, while the Topix Index fell 3%. Semiconductor companies including Tokyo Electron Ltd. were among the biggest decliners, with the tech sector under extra pressure after Taiwan Semiconductor Manufacturing Co. scaled back its outlook for chip-market expansion.
The change of fortunes for the Nikkei has been swift. The blue-chip gauge had reclaimed its historic 1989 high just two months ago and set a fresh record on March 22. If the Nikkei closes at least 10% lower from its March peak, it will be in a correction.
Japanese stocks, along with their global peers, have been ravaged recently as traders slashed bets on rate cuts by the Federal Reserve this year following a series of hawkish comments from officials and data that indicates a robust US economy. Geopolitical tensions in the Middle East have also reverberated through markets, raising risks for global trade and increasing the likelihood of higher energy costs.
“It’s a triple whamy of sorts — Fed’s hawkishness continues to take a leg up with each passing day, and semiconductor earnings have so far proved insufficient to counter the risk-off,” said Charu Chanana, a strategist at Saxo Capital Markets Pte. “Meanwhile, escalation in geopolitical concerns is also mudding the outlook.”
Chip companies including Screen Holdings Co. and Lasertec Corp. led decliners on the Nikkei. TSMC cautioned that the smartphone and personal-computing markets remain weak.
Israel struck targets in western Iran, two US officials said, raising concern that tensions in the Middle East will escalate. Separately, an explosion was heard early Friday in Iran’s central city of Isfahan, semi-official Fars news agency reported, citing local sources.
New York Fed President John Williams said while it’s “not” his baseline expectation to hike interest rates, it’s possible — if warranted. His Atlanta counterpart Raphael Bostic said he doesn’t think it will be appropriate to ease until toward the end of 2024. The Fed may “potentially” hold rates steady all year, Minneapolis Fed chief Neel Kashkari told Fox News Channel.
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