Japan’s Nikkei Drops, Erasing Gains for Week, as Chip Shares Slump (Update 1)

Reuters

12:16 JST, January 26, 2024 (updated at 16:00 JST)

TOKYO, Jan 26 (Reuters) – Japan’s Nikkei share average slumped on Friday, erasing its gains for the week, as chip-sector shares tumbled in line with U.S. peers.

The Nikkei lost 1.34% to close at 35,751.07, snapping a two-week winning streak with a 0.59% loss. It had entered the day up 0.76% for the week.

Of the benchmark’s 225 components, 185 fell, 39 gained and one was flat.

Profit-taking ahead of the weekend exacerbated declines, with some technical indicators still suggesting the rally that took the Nikkei to a 34-year high of 36,984.51 on Tuesday was too fast. The benchmark index sits about 3.2% above its 25-day moving average.

Tuesday’s peak coincided with the Bank of Japan’s decision to leave stimulus settings unchanged, but a hawkish tilt by the central bank chief in the post-meeting news conference has weighed on the market over the latter part of the week.

Even so, the Nikkei’s 6.83% climb this year eclipses all its major rivals, including the U.S. S&P 500, which closed at record highs for three consecutive sessions to take its 2024 gains to 2.61%.

“Investors are still very conscious of a sense of overheating in the market,” said Maki Sawada, a strategist at Nomura Securities.

At the same time, breaks below the psychological 36,000-level for the Nikkei are attracting dip buyers, Sawada added.

“The bottom looks quite firm,” she said.

Next week sees a pickup in the Japanese earnings season, with close to 500 companies reporting before a peak in mid-February. In the U.S. too, Apple, Microsoft , Amazon, Alphabet and Meta Platforms all announce financial results.

Chip-industry heavyweights Advantest and Tokyo Electron were the biggest drags on the Nikkei on Friday, followed by AI-focused startup investor SoftBank Group

. Shares in the companies sagged 5.51%, 2.39% and 2.2%, respectively.

The benchmark’s biggest percentage decliner was also a chip stock, with Renesas dropping 7.75%.

That follows a plunge of some 10% for Intel in after-hours trading, after revenue forecasts fell short of analysts’ estimates.

The Philadephia SE Semiconductor Index had already posted a 0.25% drop for Thursday, despite Wall Street’s Big Three indexes all gaining.