Japan Shares Slide Ahead of Yellen as Crude Weighs on Oil Stocks

  • Trading volume remains depressed as investors wait for Yellen
  • Recruit sinks as major shareholders say it will sell stakes

Japanese shares fell, retracing a part of Wednesday’s rally as a slump in crude prices led oil-related stocks lower ahead of a speech by Janet Yellen.

Trading volume in Tokyo has shrunk this week as investors brace for Federal Reserve Chief Yellen’s comments at Jackson Hole, Wyoming, on Friday, and the market searches for indications on when the world’s largest economy will raise interest rates. Oil producers and explorers including Inpex Corp. dropped, while airlines led gains as crude traded near a one-week low. Recruit Holdings Co. sank after a group of owners in the human-resources company said they would sell about $2.5 billion of its shares.

SecurityPercent ChangePrice
Topix         -0.2% 1,304.27
Nikkei 225         -0.3%16,555.95
Yen-Dollar          -0.0%   100.44

“It’s too scary to buy into Japanese shares” given the possibility markets will be whipsawed following Yellen’s speech, said Mitsushige Akino, a Tokyo-based executive officer at Ichiyoshi Asset Management Co. Shares will be sensitive to the yen, which could surge to 95 per dollar if Yellen indicates a rate increase is off the table, while it will plunge should she suggest a hike is imminent, he said.

With trading activity down in Japan this week while market participants wait for Yellen’s speech, the Nikkei 225 has traded in a tight range with prices largely unchanged from Monday. Funds with a short-term investment horizon are dominating trading, Akino said.

So-called defensive shares, including drugmakers, chemical products manufacturers and phone companies, were the biggest drags on the Topix, while banks and insurers were the biggest boosts. Volume on the index was 32 percent below the 30-day intraday average. 

  • Recruit Holdings slid 5.1 percent after its major shareholders, including advertiser Dentsu Inc., said they would sell 61.1 million shares. Recruit also agreed to buy back as many as 8.5 million of its own shares.
  • Toho Zinc Co. and Sumitomo Metal Mining Co. were among the biggest decliners on the Nikkei 225, sinking 4.3 percent and 4.9 percent respectively, as non-ferrous metal shares slumped.
  • Airlines gained the most on the Topix amid prospects for cheaper fuel after crude prices fell. Japan Airlines Co. added 2.2 percent. 

The Topix has retreated 16 percent this year, the second-worst performer among developed markets. As well as the Fed, investors are seeking clues on whether the Bank of Japan will add to its already record stimulus measures when it meets next month.

Futures on the S&P 500 Index were little changed. The underlying measure dropped 0.5 percent on Wednesday as a selloff in drugmakers dragged U.S. stocks lower.

Oil tumbled 2.8 percent Wednesday, as U.S. crude stockpiles unexpectedly increased, keeping supplies at the highest in at least three decades with the peak summer demand period approaching its end.

“The market just isn’t moving, and investors seem to be looking to Yellen’s speech,”  Masakuni Fujiwara, chief executive officer at VistaMax Fund Advisors Ltd. in Tokyo. “Reasons to move have already been mostly exhausted in Japan, so we’re looking overseas at the moment.”

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