Oil Prices Rise, Nikkei Falls 2.11 Percent
JAKARTA - Tokyo shares closed lower on Wednesday. The rise in oil prices after a new attack between the United States and Iran again triggered inflation concerns and pressured market sentiment.
Kyodo News, quoted Wednesday, July 8, reported that the Nikkei 225 index fell 1,437.91 points or 2.11 percent from Tuesday's trading to 66,819.05. The broader Topix index also weakened 55.83 points or 1.37 percent to 4,006.43.
On the Tokyo Stock Exchange's main board Prime Market, the greatest pressure was on precision instruments, non-ferrous metals, and machinery stocks. Non-ferrous metals are a group of metals other than iron.
Crude oil prices rose after the US military announced it had launched an attack on Iran. The attack was said to be a response to an attack on tankers in the Strait of Hormuz.
The rise in oil prices has raised concerns about inflation. For the Japanese market, pressure also comes from concerns about Japan's fiscal health under Prime Minister Sanae Takaichi's "responsible proactive" fiscal policy.
These concerns also put pressure on Japanese government bonds. The yield on the benchmark 10-year Japanese government bond rose to 2.870 percent. The figure is the highest level since May 1997, according to Japan Bond Trading.
The yield was then closed at 2.865 percent, up 0.025 percentage points from Tuesday's close.
In the currency market, the US dollar moved within a narrow range of below 162 yen in Tokyo. Uncertainty in the Middle East has made investors buy dollars.
At 17:00 local time, the dollar was at 162.21-162.22 yen. The figure was compared to 162.05-162.15 yen in New York and 161.96-161.97 yen in Tokyo on Tuesday afternoon.
The euro was quoted at 1.1425-1.1427 US dollars and 185.33-185.37 yen. The position was compared to 1.1406-1.1416 US dollars and 184.93-185.03 yen in New York, and 1.1425-1.1426 US dollars and 185.05-185.09 yen in Tokyo on Tuesday afternoon.
Brokers said market sentiment was depressed as escalating tensions in the Middle East could push energy prices higher. Rising energy costs are feared to cut corporate profits.
The risk of a spike in oil prices has weakened automotive and airline stocks. The two sectors had previously recovered after concerns about the oil market eased.
However, the market's weakness on Wednesday has not shown a complete panic. Maki Sawada, strategist at the Investment Content Department of Nomura Securities, said the decline did not occur evenly across all stocks.
"If investors are really very pessimistic, the market will likely see stocks fall broadly," Sawada said, quoted by Kyodo News.
According to Swada, the market reaction on Wednesday showed that the risk of oil price spikes had not been seen as the main negative factor.
Volatility in a number of large-cap chip and artificial intelligence stocks even briefly brought the Tokyo market into positive territory, before eventually closing again weaker.