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Japanese stocks tumbled on Thursday, with declining sectors such as the Paper & Pulp, Railway & Bus and Real Estate sent Nikkei 225 down 1.22% after the close.
The top-performing components of the index include Olympus Corp. (T:7733), which advanced 11.15% to 2132.5 at the close. Also, shares of Rakuten Inc (T:4755) climbed 2.78% or 27.0 points to close the session at 998.0 and NEC Corp. (T:6701) rose 2.38% to 5170.0 in the late trading session.
The worst of the bunch were Mitsui Engineering & Shipbuilding (T:7003), dropping 6.35% or 29.0 points to hit the 428.0 mark at the close. Shares of J.Front Retailing Co., Ltd. (T:3086) were down 6.25%, ending the day at 810.0 while Dentsu Inc. (T:4324) dropped 5.38% or 145.0 points to 2550.0.
The declining components overshadowed the top performers on the Tokyo Stock Exchange, with 2665 decliners, 871 climbers and 149 unchanged stocks.
However, the Nikkei volatility didn’t change, remaining at the 28.90 mark.
Crude oil tumbled 1.03% to $37.62 a barrel. Brent oil for August delivery declined 0.89% to $39.95 a barrel and August Gold Futures contract climbed 0.16% to $1777.90 a troy ounce.
This is not the first time the Japanese stock market index dropped this month, Tokyo stocks declined sharply two weeks ago, sending Nikkei tumbling over 3%, following Wall Street declines due to rising concerns over the impact from a potential second wave of the coronavirus epidemic.
At the time, every industrial sector declined, with worst performers including marine transportation, mining and nonferrous metal concerns.
The Nikkei 225 index was marred by continuous losses in May 2019. This was after traders took a 10-day hiatus as part of Japan’s Golden Week Celebrations. Even so, the situation hasn’t improved one year later. Nikkei joins indices such as KOSPI in the list of the region’s biggest losers. This is despite the index closing 2019 as one of Asia’s top performers.
The state of affairs can be attributed to Japan’s escalating COVID-19 cases. Remember some of the corporations in the index have links to the U.S., for example, Mitsubishi and Nissan. As such, new infections in America also affect the Nikkei 225.
Another reason for the dive is Japan’s growing rivalry with South Korea. The trade wars which have been ongoing since 2019 also fuelled Japan’s latest recession. Essentially, Japan blocked some of its organizations from doing business with the country. The tension recently surged after Japan fought Korea’s G7 inclusion.
Tokyo’s Nikkei Index could drop when the trading resumes on Monday, after the initial weekly jobless claims count in the US rose for the first time in 4 months, to 1.416 million. This figure beat the market estimates of 1.30 million. This could indicate the resurgence of unemployment, following a second Covid-19 large=scale in some of the states of the US.
The recovering US trading session may have affected Asian stocks at the open. However, it is more likely that this represents a healthy correction instead of a big reversal of the bull market, given that US corporate earnings continue to look good. Over 80% of the S&P 500 companies that posted earnings results have exceeded analysts’ estimates.
Nikkei components are consolidating near the key support level at 22,550, where its 20-Day Simple Moving Average (SMA) is positioned. Dropping under this level could send the index further down towards the 22,480 (10-Day SMA), followed by the major support at 22,000.
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