Nikkei tumbles to 3-week low on worries about EU economic growth

Employees work at the Tokyo Stock Exchange in Japan. (Bloomberg pic)

TOKYO: Japan’s Nikkei dropped to three-week lows on Friday morning on fresh concern about the growth after the European Central Bank decided to delay its first post-crisis interest-rate hike, pulling down Japanese shares across the board.

At midday, the Nikkei share average was down 1.5% at 21,142.75. It touched 21,102.79, the lowest level since Feb. 14. The index, down the past three days, has declined 2.2% this week.

The broader Topix dropped 1.3% to 1,580.97. Declining issues outnumbered advancing ones 1,974 to 129.

All of the Topix’s 33 subsectors were in the red, with cyclical stocks such as shippers and machinery firms leading the losses.

In the United States overnight, main indexes fell for a fourth consecutive session after the ECB said it would defer interest rate hikes and offered banks a new round of cheap loans.

Shogo Maekawa, global market strategist at JPMorgan Asset Management in Tokyo, said the Federal Reserves dovish stance “helped the market early this year, so investors wondered which direction the ECB’s decision would take the market to, but right now they are deeply worried about the global economic slowdown.”

“The market’s attention has turned to economic fundamentals after somewhat pricing in US-China trade talks which were of its concern in the past few weeks,” Maekawa said.

Japanese shippers took a hit after the Baltic dry index, or freight charges, fell 1.1%. Mitsui OSK Lines plunged 3% and Nippon Yusen tumbled 3.2%.

Kawasaki Kisen nosedived 12% after saying it expects a 100 billion yen (US$896.86 million)in net loss for the fiscal year ending March.

Chip machinery maker Advantest Corp stumbled 4.5% and Tokyo Electron shed 3.4%.

Insurers and banks also lost ground after Treasury yields dropped on global growth concerns. Dai-ichi Life Holdings and T&D Holdings both shed 4.2%, and Mitsubishi UFJ Financial Group declined 2.1%.

Nikkei futures and options contracts expiring in March were forecast to settle at 21,348.40, market participants said on Friday, citing estimates by brokerages.

The closely watched settlement price, known in Japan as the special quotation, or “SQ”, is calculated from the opening prices of the 225 shares in the Nikkei average on the second Friday of the month.