Topix Index Little Changed as Builders Gain, Glassmakers Fallby and
Topix has rallied 14 percent this year through Tuesday
Nikkei 225 retreats from highest closing level in three months
Japan’s Topix index closed little changed, with construction shares leading gains and glass makers falling, as investor weighed what an unexpected contraction in American manufacturing means for the Federal Reserve’s interest-rate outlook.
The Topix index added less than 0.1 percent to 1,602.26 at the close of trading in Tokyo, after swinging between gains and losses. The Nikkei 225 Stock Average slipped 0.4 percent to 19,938.13, after closing on Tuesday at its highest level since Aug. 20. The yen traded at 123.07 per dollar after gaining 0.2 percent on Tuesday as an Institute for Supply Management report showed U.S. manufacturing shrank in November at the fastest pace since the last recession.
“The market is finding it hard to interpret the prospects for the Fed rate hike and U.S economic indicators, which are all over the place,” said Tomomi Yamashita, a fund manager at Shinkin Asset Management Co., which oversees $6.3 billion. “We have more events coming up, and it’s scary to think that volatility may increase.”
Construction stocks gained the most among the 33 Topix industry groups, with Taisei Corp. adding 3.9 percent and Kajima Corp. rising 3.4 percent.
Euglena Co. jumped 8.8 percent after ANA Holdings Inc., Japan’s largest airline, said it plans to use biofuel made by the algae-products maker. Minebea Co. sank 6.7 percent, the biggest drop on the Nikkei 225, after saying sales of its liquid crystal display backlights shrank in November.
Japanese stocks have weathered a cooling Chinese economy and the prospect of monetary tightening by the Fed to rank among the best performers in developed countries this year. The Topix has rallied 14 percent in 2015.
E-mini futures on the Standard & Poor’s 500 Index traded little changed after the underlying gauge jumped 1.1 percent on Tuesday.
Traders see a 72 percent chance the Fed will raise U.S. interest rates in December, down from 74 percent before the factory data. By contrast, economists surveyed by Bloomberg unanimously predict the European Central Bank will expand stimulus on Thursday.
Chicago Fed President Charles Evans, among the most dovish of Fed policy makers, said on Tuesday that he “would prefer to have more confidence than I do today that inflation is indeed beginning to head higher” before raising rates.
“The ISM manufacturing figures were terrible. They were at a level indicating a recession,” said Chihiro Ohta, general manager of investment information at SMBC Nikko Securities Inc. in Tokyo. “The market’s focus is shifting to the pace of rate hikes in the U.S. That pace is likely to be gradual as the American economy doesn’t seem to be as strong as expected. The Nikkei 225 rose above 20,000 yesterday, but we’re not in a situation where we want to make large purchases.”