Japan Stocks Plunge Again in Wildest Trading Day in Four Years

Updated on

Japanese stocks plummeted, after seesawing from gains to losses in the wildest trading range in four years. Volume was more than twice the average.

The Topix index slid 3.3 percent to 1,432.65 at the close in Tokyo, reversing an intraday rally of 1.9 percent. It has plunged 15 percent since China sparked a global rout on Aug. 11 when it devalued the yuan. The Nikkei 225 Stock Average dropped 4 percent to 17,806.70, the lowest close since Feb. 10. Shares in Shanghai extended the biggest plunge since 1996.

Japanese stocks that rely on international trade led declines, with shipper NS United Kaiun Kaisha Ltd. dropping 8.6 percent, while warehouse operator Mitsubishi Logistics Corp. sank 6.1 percent. Commodity-related shares fell after the Bloomberg Commodity Index of 22 raw materials on Monday closed at the lowest level since 1999. Sapporo Holdings Ltd. was the biggest decliner in the Nikkei 225, falling 9.3 percent. Airlines were the only industry to rise on the Topix, with Japan Airlines Co. gaining for the first time in six days.

“It will take a big policy reaction out of China” to trigger a proper rebound in global shares, said Isao Kubo, a Tokyo-based equity strategist at Nissay Asset Management Corp. “It’s best to expect high volatility for the foreseeable future rather than jump to conclusions about if this is the end or not.”

Nikkei Volatility

Volatility rose for a sixth day, with the Nikkei Stock Average Volatility Index jumping 32 percent to the highest since March 2011. Volume on the Topix was 110 percent above the 30-day average and 122 percent higher on the Nikkei 225.

The yen weakened 0.6 percent to 119.10 per dollar after strengthening to as much as 116.18 overnight in New York.

Investors eyed China’s stock markets for further clues to the rout which began after the nation’s central bank devalued its currency two weeks ago. Gains in Japanese markets were wiped out after the Shanghai Composite Index retreated in afternoon trading, sliding 7.3 percent. That followed a 8.5 percent drop on Monday, the most since 2007.

Shippers and warehouse were among the biggest declines among the Topix’s 33 industry groups, with Nippon Yusen KK sliding 4.5 percent and NS United Kaiun Kaisha plunging for a fifth day. Mitsubishi Logistics dropped 6.1 percent, also a fifth day of losses. The Baltic Dry Index slumped for a fifth day, dropping 2.6 percent.

Cheaper Fuel

Commodity-related stocks continued falling amid the rout in raw-materials, with oil services provider JGC Corp. dropping 4.2 percent. Nippon Steel & Sumitomo Metal Corp. lost 5.2 percent.

Sapporo Holdings sank 9.3 percent as the beermaker gave up yesterday’s gains, which were triggered by a broker upgrade.

Airlines were one of the few gainers, as the prospects for lower fuel prices sent Japan Airlines 1.6 percent higher, its first gain in six days.

Futures on the Standard & Poor’s 500 Index rose 1.6 percent. The underlying measure plunged 3.9 percent on Monday, finishing 11 percent below its May high, meeting the definition of a correction for the first time since 2011.

Fear gripped trading for half an hour after the U.S. markets opened, with the Standard & Poor’s 500 Index coming to within 34 points of setting off a marketwide circuit breaker that would’ve shut down trading for 15 minutes.

At one point, the Dow Jones Industrial Average plummeted more than 1,000 points, later paring declines to 588.40 points at the close. Volatility surged, with the Chicago Board Options Exchange Volatility Index jumping as much as 90 percent.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE