Japanese Shares Fall to Cap Second Weekly Decline on Oil, China

  • Topix reverses early rally sparked by rebound in S&P 500
  • Insurers and brokerages lead retreat while airlines advance

Japanese stocks fell, capping its second weekly loss of the year, as oil prices failed to sustain a rebound and Chinese shares declined.

The Topix slid 0.3 percent to 1,402.45 at the close of trading in Tokyo, after jumping as much as 1.9 percent earlier in the trading day, with volume 24 percent above the 30-day average. The measure lost 3.1 percent this week amid high volatility after tumbling 6.5 percent the previous week. The Nikkei 225 Stock Average retreated 0.5 percent to 17,147.11 after the gauge fell below 17,000 for the first time since September on Thursday.

E-mini futures on the Standard & Poor’s 500 Index lost 0.9 percent in trading Friday as crude slipped back below $31. China’s Shanghai Composite index dropped 3.7 percent, heading toward a third weekly decline. The yen strengthened 0.3 percent to 117.73 per dollar after falling to 118.06 on Thursday.

“Overall it’s still risk off," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management Co. “Investors are getting fed up seeing the yen can’t maintain a 118 level. Oil was rebounding but that is just short term."

Japanese shares opened the day higher to track gains in U.S. shares before resuming declines. The Standard & Poor’s 500 Index rose 1.7 percent Thursday, the most in almost six weeks, as oil advanced beyond $31 a barrel, bolstering energy producers and helping stabilize global markets rattled by concerns over China and sliding commodity prices.

Insurers and brokerages led declines among the 33 Topix industry groups. Sompo Japan Nipponkoa Holdings Inc. dropped 2.9 percent. Kawasaki Heavy Industries Ltd. tumbled 6.6 percent after saying it expects to cut its profit forecasts for this fiscal year after booking a charge on a shipbuilding venture in Brazil.

Airlines led gains among the industry groups, with Japan Airlines Co. adding 3.3 percent. Sharp Corp. surged 15 percent for the biggest increase on the Nikkei 225. Taiwan’s Hon Hai Precision Industry Co. may boost its offer for the struggling Japanese company to 700 billion yen ($5.9 billion) from 500 billion yen, the Yomiuri newspaper reported.

Traders have been whipsawed in 2016, with equities around the world off to their worst start to a year on record as oil plummeted to levels last seen more than a decade ago and China struggled to maintain control over its markets. The Topix is down 9.4 percent for 2016, after advancing 9.9 percent last year.

Equities have also been pressured after the U.S. Federal Reserve raised interest rates last month. U.S. stocks got a boost Thursday after Fed Bank of St. Louis chief James Bullard said the rout in energy prices may dent inflation expectations, tempering the outlook for rate hikes. The comments suggest that the FOMC’s 2016 voters “might not be quite as hawkish as we thought,” Jefferies Group LLC economist Thomas Simons said in a note.

“The recent fall in stocks was a result of lack of clarity over when the U.S. will raise rates, China’s ad hoc approach to policy, and receding expectations of more easing from the Bank of Japan,” said Juichi Wako, a senior strategist at Nomura Holdings Inc. in Tokyo. “The master key that ties all these elements together is oil. If the decline in oil prices stops, it’ll be easier for oversold stocks to rebound."

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