Japan’s Nikkei Tracks Wall Street Lower; Chip Gains Cap Losses (Update 1)

Reuters

12:40 JST, July 19, 2024 (updated at 16:30 JST)

TOKYO, July 19 (Reuters) – Japan’s Nikkei share average fell on Friday, tracking overnight Wall Street declines, although a rebound in semiconductor stocks limited losses.

The Nikkei closed down 0.16% at 40,063.79.

The benchmark index fell below the key psychological mark of 40,000 for the first time since July 2 earlier in the session, after declining more than 2% on Thursday, as chip-related shares slumped and a stronger yen weighed.

The broader Topix finished 0.27% lower at 2,860.83.

U.S. stocks tumbled on Thursday, as investors continued to rotate away from high-priced megacap growth stocks and second-quarter earnings season gathered steam.

The declines dragged on sentiment, with 159 of the Nikkei’s 225 constituents declining.

However, investors appeared to rethink the recent sell-off of chip-related shares, partly in response to better-than-expected earnings results from TSMC, the world’s　largest contract chipmaker, said Hiroshi Namioka, chief strategist at T&D Asset Management.

Namioka expects the Nikkei to turn higher in the coming weeks, as Japan’s earnings season gets in full swing.

“If TSMC is doing well, then we can assume from a supply chain perspective that Japan’s semiconductor-related firms like Tokyo Electron are, too.”

Analysts also anticipate strong revenue results from export-related companies, which should benefit from a weak yen.

Nikkei heavyweights Tokyo Electron and Advantest climbed 2.3% and 1.6%, respectively, to give the biggest boost to the index.

Renesas Electronics jumped 3.6%.

Among the Tokyo Stock Exchange’s 33 industry groups, electric machinery, which includes chip-related shares, was up 0.3%, among a handful of sectors that gained.

Precision machinery outperformed with a 1.6% rise.

Disco fell 4.6% to become the worst percentage decliner, after the maker of chip manufacturing devices’ financial results disappointed.