Japanese Stocks Slip, Extending Worst Start to Year Since 2008

  • U.S. manufacturing contracts at fastest pace in six years
  • Shares in Shanghai extend losses after Monday's market rout

Japanese stocks fell for a second day as shares in China continued their New Year rout and the yen held near a two-month high.

The Topix index declined 0.3 percent to 1,504.71 at the close in Tokyo after dropping 2.4 percent Monday, its worst opening day of a year since 2008. The yen traded at 119.44 per dollar, near its highest level since October. Shares in Shanghai extended Monday’s plunge, which most investors pinned on weak Chinese economic data and this week’s possible end of a ban on share sales.

“Today we’re seeing a correction in risk-off moves, but it doesn’t feel like the coast is really clear,” said Masashi Akutsu, a strategist at SMBC Nikko Securities Inc. in Tokyo. “Shanghai stocks managed to eke out minimal gains earlier, but anxiety continues to linger.” 

Evidence of slowing manufacturing in China and investor anxiety over the end of a ban on share sales by major stakeholders expected on Jan. 8 weighed on sentiment for a second day, with the Shanghai Composite Index falling 1.4 percent, paring early gains of as much as 1 percent. Trading in China was halted on Monday after a 7 percent drop engaged the nation’s new market circuit breakers on their first day.

The Nikkei 225 Stock Average lost 0.4 percent to close at 18,374. Volatility on the gauge slipped 0.5 percent to 23.22, a day after surging 20 percent. The current level is still below the peak of 47.01 reached at the height of last year’s selloff on Aug. 25.

E-mini futures on the Standard & Poor’s 500 Index added less than 0.1 percent. The underlying measure closed 1.5 percent Monday lower after paring losses in late afternoon trading. Manufacturing in the U.S. contracted in December at the fastest pace in more than six years as factories, hobbled by sluggish global growth, cut staff at the end of 2015. The Institute for Supply Management’s index declined to 48.2, the weakest since June 2009, from 48.6 a month earlier.

“Economic indicators in both China and the U.S. are weak. As they’re the world’s two biggest economies and the impact is huge, each new data point is keeping stock markets in suspense,” said Toshihiko Matsuno, chief strategist at SMBC Friend Securities Co. in Tokyo. “But monetary policy is still accommodating and once markets calm down we’ll see money flow into risk assets again.”

Soy Sauce, Fish

Exporters in Japan saw selling for a second day as the yen’s strength weighed on the outlook for earnings. Toyota Motor Corp. lost 1.5 percent to be the biggest drag on the Topix, while soy sauce maker Kikkoman Corp., which gets 47 percent of revenue from North America, dropped 3.1 percent.

Japanese companies that do business in China declined. Murata Manufacturing Co., an electronic components maker that gets more than half of its revenue from the Greater China region, dropped 1.3 percent. Muji brand operator Ryohin Keikaku Co., which relies on the region for a fifth of sales, lost 2.2 percent. 

Fishing stocks were the largest decliners among the Topix’s 33 industry groups, with Nippon Suisan Kaisha Ltd. sinking 6.2 percent. The group was the best-performer last month, surging 24 percent while the broader market lost 2.1 percent.

Mobile carriers gained after Nomura Holdings Inc. raised its rating on NTT Docomo Inc., citing a stronger outlook for medium-term growth. Shares of NTT Docomo jumped 2.7 percent, while rival KDDI Corp. added 1.7 percent.

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