Japan’s Nikkei Set for Worst Day in 3 Weeks as Chip Stocks Tumble

Reuters

15:15 JST, October 26, 2023

TOKYO (Reuters) – Japan’s Nikkei share average slumped on Thursday and was on course for its worst day in three weeks, as chip-related shares led a broad selloff after U.S. tech stocks tumbled overnight.

The Nikkei entered the midday recess down 2.13% at 30,602.44, close to the session low. Of the equity benchmark’s 225 components, 211 fell while just 13 rose, with one flat.

The drop, if it holds, would be Nikkei’s biggest since Oct. 4, and snap a two-day win streak.

The broader Topix sank 1.57%, with an index of growth stocks sliding 1.77% and underperforming a 1.4% decline in value shares.

The decline follows sharp losses on Wall Street, with the S&P 500 losing 1.4% and the tech-heavy Nasdaq slumping 2.4%. The Philadelphia SE Semiconductor Index plunged 4.1%.

Tech took an outsized hit after Alphabet shares fell on disappointing earnings, while a climb back toward 16-year peaks for long-term Treasury yields sapped overall risk appetite.

Right now, the Nikkei is more tracking external factors, especially the U.S. market, said Kelvin Wong, a senior market analyst at Oanda, pointing to elevated correlation with the S&P 500 over the past four weeks.

The Nikkei’s 200-day moving average of around 30,300 is a key level of support to keep an eye on, he added.

Chip-testing equipment maker Advantest 6857.T led Nikkei decliners, dropping 6.52%. Chip-making machinery giant Tokyo Electron 8035.T was next with a 4.59% retreat, followed by a 4.47% slide in smaller peer Screen Holdings.

Interest rate-sensitive property stocks also slumped, with Mitsui Fudosan down 4.39% and Tokyu Fudosan Holdings 3289.T losing 3.63%.

Real estate was the worst performer of the Tokyo Stock Exchange’s 33 industry groups, declining 2.96%.

It was followed by electric machinery and precision machinery .PRCS.T, which dropped 2.48% and 2.24%, respectively.

Only agriculture and pulp and paper escaped losses, with both about flat.