Japan’s Nikkei Slips after Fed Dashes Hopes of March Rate Cut (Update 1)

Reuters

12:49 JST, February 1, 2024 (updated at 16:50 JST)

TOKYO (Reuters) – Japan’s Nikkei share average ended lower on Thursday, as investors were disappointed after U.S. Federal Reserve chair Jerome Powell’s comments doused hopes of a potential interest rate cut in March.

The Nikkei finished down 0.76% at 36,011.46, after brushing below the key 36,000 level earlier in the session.

The broader Topix fell 0.67% to 2534.04.

Powell expressed good news on the battle against inflation at the conclusion of the central bank’s two-day meeting on Wednesday, but said rate cuts would not be appropriate until there is “greater confidence that inflation is moving” towards the central bank’s 2% target.

“It’s tough to escape the Fed story as the major driver of price action today,” said Capital.com’s senior financial market analyst Kyle Rodda.

“The lower odds of an March cut have the marginal effect of tightening financial conditions, so stocks have to pull back to reflect that.”

Japanese indexes tracked overnight weakness in Wall Street, with U.S. stocks falling after the latest Fed communications.

A stronger yen also weighed on Japanese exporters.

The Topix’s automaker sub-index tumbled 1.41%. Heavyweights Toyota Motor and Honda Motor fell 1.83% and 1.85%, respectively.

Of the Nikkei’s 225 constituents, only 51 rose, while 170 declined.

In individual stocks, domestic earnings remained the dominating theme among the best performers of the day.

Shares of TDK Corp gained 5.48%, while Nomura Holdings Inc – Japan’s biggest brokerage and investment bank company – was up 5.15%.

Nomura Holdings briefly touched its highest levels since 2015, following an announcement on Wednesday that the company would buy back up to 4% of its own shares after reporting record net revenue from its investment banking division.

Pharmaceutical company Daiichi Sankyo Co Ltd was the third-best performer, climbing 5.13%.

Aozora Bank came in at the bottom after dropping 21.49%, followed by Sumitomo Pharma Co, losing 18.43%.