Nikkei 225 Futures Tumble in Morning Before Paring Loss

Japan’s Nikkei 225 Stock Average futures in Osaka tumbled as much as 2.6 percent in 12 minutes this morning before paring declines.

Nikkei 225 futures fell 440 points to 14,410 between 10:15 a.m. to 10:27 a.m. local time, with volume more than twice the five-day intraday average. The gauge traded at 14,660 as of 12:18 p.m., paring declines to 1 percent. The Nikkei 225 cash equities measure lost 1.1 percent at the trading break. Japan will hold elections on Sunday that are expected to give Prime Minister Shinzo Abe a mandate to pursue economic reforms.

“Futures falling shows there’s some fast money taking profit and closing positions ahead of the weekend elections,” said Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages more than $130 billion. “The market is expecting a landslide victory, and anything less than that could be a short-term disappointment so some investors are taking profits now.”

After plunging 21 percent from this year’s high on May 22 through June 13, Nikkei 225 Futures in Osaka rebounded 19 percent to yesterday.

Japanese shares have been rising amid optimism Abe will push through reforms following the elections. The Topix index is poised to rise for a fifth week, its longest weekly winning streak since February.

A victory in the polls would end a split parliament by giving Abe’s coalition control of both chambers. His Liberal Democratic Party would have the strongest mandate since 2007, enabling it to carry out a program of monetary easing, fiscal stimulus and structural reform known as Abenomics.

The LDP and coalition partner New Komeito are on track to win more than enough seats to secure a majority, according to a poll published in the Nikkei newspaper on July 17.

To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Masaaki Iwamoto in Tokyo at miwamoto4@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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