Nikkei slumps 1.46% to 5-week low on oil supply concerns

10:45, March 11, 2011      

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Tokyo stocks declined Thursday, with the key Nikkei stock index falling 1.46 percent to a five-week closing low, as declines in U.S. and Asian shares compounded fears that unrest in the Middle East and North Africa will derail the global economic recovery.

Brokers said that concerns were rising about the possibility of the political turmoil in Libya leading to a halt in crude oil exports and the unrest may spread to oil-rich Saudi Arabia.

"Libya is chaotic and a sense of uncertainty for the future is increasing even in countries surrounding Libya," said one Tokyo- based investment manager. "It's hard to know how high oil prices will go and how much that will damage the economy. That's deterring investors from putting new money into stocks," he said.

"With demonstrations expected in Saudi Arabia, investors want to wait and see until the events are over," added another analyst.

Oil spiked on Thursday in the U.S. at around 105 U.S. dollars per barrel, as some observers said the damage inflicted on Libya's own oil infrastructure may be permanent and irreversible.

The 225-issue Nikkei Stock Average ended the day by 155.12 points down from Wednesday at 10,434.38, marking the bourse's lowest closing level since Feb. 3, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange relinquished 13.45 points, or 1.42 percent, to close at 930.84.

Adding to investor consternation Thursday was China reporting a 7.3 billion U.S. dollars trade deficit in February, marking the nation's first trade deficit since March 2010 and its largest in seven years.

Further contributing to a bearish market mood, Japan's gross domestic product shrank at an annualized 1.3 percent rate in the three months ended Dec. 31, more than the 1.1 percent contraction reported last month, government data showed Thursday.

"The falls in Asian markets weighed on the Tokyo market and China's trade data triggered some selling of China-linked shares," said Yutaka Miura, senior technical analyst at Mizuho Securities Co.

China-linked issues lost ground, with industrial robotic maker Fanuc dropping 2.7 percent to 12,530 yen and was a notable decliner in Thursday's Nikkei and Komatsu slumped 2.3 percent to close at 2,560 yen.

Tech-shares fell mirroring their U.S. counterparts' overnight retreat, with Tokyo Electron falling 2.3 percent to 5,160 yen and Sumco slipping 2.9 percent to 1,450 yen. Memory chip maker Elpida plunged 8 percent, to 1,107 yen and Toshiba dropped 2.3 percent to 500 yen.

"Falls in chip-related shares added to the pressure on the overall market," said Masayoshi Okamoto, equity strategist at Jujiya Securities Co. "The under-performers in the U.S. market overnight were straightforwardly reflected in Tokyo," he said.

Japanese megabanks were also lackluster on Thursday, with top- lender Mitsubishi UFJ Financial Group losing 1.6 percent to 442 yen and Sumitomo Mitsui Financial Group Inc. retreating 2.4 percent to 2,924 yen. Mizuho Financial Group meanwhile also closed in negative territory, retreating 1.2 percent to close at 164 yen.

Speculation was rife Thursday about a possible merger between the Tokyo Stock Exchange and the Osaka Exchange, following TSE Inc. 's President Atsushi Saito, announcing in an interview he plans to hold merger talks with the Osaka Exchange.

Following the news the Osaka Securities Exchange Co. surged 6.9 percent to 460,000 yen. The merger could take place as early as this month, sources with knowledge of the situation said Thursday.

Trading volume rose to 1.94 billion shares on the Tokyo Exchange's First Section, up from Wednesday's volume of 1.90 billion shares, with declining stocks outnumbering advancing ones by 1,436 to 158.

Source: Xinhua
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