Japanese Shares Drop as Investors Await U.S. Jobs for Fed Hints

  • Stocks fall for the first time in five days, led by retailers
  • Topix index advanced 2.1% this week as yen kept sliding

Asia Outlook: Where Are the Opportunities?

Japanese shares fell for the first time in five days as the yen halted its decline and investors awaited U.S. payrolls data to assess the likelihood of a Federal Reserve rate increase this year.

The Topix index declined 0.3 percent at the close in Tokyo after rising 2.4 percent over the previous four days. Local markets are shut Monday for a national holiday. The yen rebounded from its longest losing streak against the dollar since July 2014 after a sudden plunge in the pound spooked investors. A series of economic data that beat estimates and hawkish remarks from Fed officials have bolstered expectations for an increase in U.S. rates this year, weakening the Japanese currency for eight days through Thursday.

SecurityPercent ChangePrice
Topix-0.3%1,350.61
Nikkei 225-0.2%16,860.09
Yen-Dollar+0.1%103.88

“It’s partly the jobs-data wait but also the fact that Hong Kong and Japan are going to be closed on Monday,” said Andrew Sullivan, managing director of sales trading at Haitong International Securities Group Ltd. in Hong Kong. “People are more cautious because they don’t want to be exposed to the market when there’s key data coming out and they can’t react to it.”

Citigroup Inc. lowered its recommendation on Japanese equities on Thursday to underweight from neutral, citing expectations for a resurgent yen. It advised investors to seek strategies with no currency hedging and to focus on sectors that tend to react positively to rising oil prices. Brent crude has advanced 14 percent in two weeks.

Around 11 stocks fell for every seven that rose on the Topix, with retailers, telecommunication shares and chemical companies contributing most to the gauge’s weakness.

  • Seven & i Holdings Co. dropped 5.1 percent after the retail group unveiled a restructuring plan that involved shutting some department stores.
  • Takara Bio Inc. slumped 8.3 percent after Nomura Holdings Inc. cut its rating on the stock to neutral from buy. The drugmaker rallied earlier this week after a Japanese biologist won the Nobel Prize for medicine for his discoveries of mechanisms for autophagy, or how cells degrade and repair themselves. Takara is developing systems for monitoring autophagy.
  • Japan Display Inc. jumped 3.7 percent. Fellow Apple Inc. supplier Dialog Semiconductor Plc’s upbeat third-quarter results have positive implications for iPhone sales, RBC Capital Markets analyst Amit Daryanani said.

U.S. Jobs

U.S. jobless claims dropped by 5,000 to 249,000 in the week ended Oct. 1, according to a Labor Department report released Thursday, beating a median forecast in a Bloomberg survey that called for 256,000. The momentum in the U.S. labor market will make or break the Fed’s plans to raise interest rates before year-end, Bloomberg Intelligence economists wrote. Futures contracts show a 64 percent chance of an increase by December, up from 51 percent at the beginning of last week.

“With a slew of U.S. economic data beating forecasts this week, the odds of a rate hike within this year have been on the rise,” said Masahiro Ayukai, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “U.S. jobless claims numbers have further lifted hopes over the upcoming payrolls data.”

Banks Rebound

The Topix advanced 2.1 percent this week as the yen retreated from near the highest levels in almost three years and concern over Deutsche Bank AG’s financial troubles eased. A measure of bank stocks gained 3.4 percent this week after dropping 7.5 percent the previous five days.

Economists expect the U.S. economy to have added 172,000 jobs in September, up from 151,000 in the previous month.

(An earlier version of this story corrected the direction of Topix move in headline.)

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