Japan’s Nikkei Eases on Earnings Drag, Hawkish Fed

Reuters

15:41 JST, November 10, 2023

TOKYO, Nov 10 (Reuters) – Japan’s Nikkei share average edged lower on Friday, tracking overnight Wall Street losses following a hawkish tilt by U.S. Federal Reserve Chair Jerome Powell, while some heavyweight stocks including SoftBank Group slumped after disappointing earnings.

The Nikkei .N225 ended the day down 0.24% at 32,568.11, but well off lows from the morning session when the index sagged as much as 1.22%.

The broader Topix .TOPX reversed early losses to finish 0.07% higher.

Both benchmarks gained for the week, with the Nikkei up 1.94% and the Topix rising 0.62%.

Overnight, Powell said he and his Fed colleagues “are not confident” that policy is yet restrictive enough to tame inflation, helping to send the 10-year U.S. Treasury yield US10YT=RR soaring as much as 13 basis points to 4.654%.

That led the dollar to surge as high as 151.39 yen JPY=EBS, but without buoying the overall Japanese market.

“There is really nothing of the ‘weaker yen means buy exporters on the boost to earnings’,” said Maki Sawada, a strategist at Nomura Securities.

“Instead it’s the rise in U.S. yields behind the weaker yen that’s making investors nervous.”

That was clear from the underperformance in growth stocks, with a Topix sub-index of the shares .TOPXG retreating 0.25%, while a sub-index of value shares .TOPXV gained 0.38%.

Startup investor SoftBank Group 9984.T slumped 8.17%, making it the Nikkei’s biggest drag.

Nissan 7201.T and Honda 7267.T were other notable decliners, both falling more than 4%.

Financial results created a yawning gap between the biggest winners and losers in the session, with engineering company JGC 1963.T and camera maker Nikon 7731.T each tumbling in excess of 10%, while PC security company Trend Micro 4704.T surged 13.52% and chemical company Resonac 4004.T soared 10.47%.

Japanese earnings season reaches a crescendo on Friday, with about 650 companies reporting, including chip-making equipment giant Tokyo Electron 8035.T, before mostly coming to an end on Tuesday of next week.