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Nikkei Plummets As Stocks See Massive Sell-off On Economic Woes

6/22/2009 9:58 PM ET

The Japanese market is trading deep down in the red on Tuesday with the sharp losses overnight on Wall Street on renewed concerns about the global economy triggering some heavy selling across the board. Securities, mining and iron & steel stocks are among the worst hit. A stronger yen is taking a fairly heavy toll of exporters.

The benchmark Nikkei which went down by over 200 points to 9,622 within minutes of commencement of trading, is plunging deeper into the red now. The index is currently down by as much as 277 points or 2.82% at 9,548. On Monday, The Nikkei had closed at 9,826, up 40 points or 0.41%, despite profit taking in late trading.

Several blue chip stocks, including those of car maker Toyota Motor and electrical machinery manufacturer Sony were ask-only for a while this morning. Currently, Toyota Motor and Sony are trading lower by 2.2% and 2.7% respectively.

Oil stocks Showa Shell Sekiyu and Nippon Oil are down sharply in the red. Steel stocks JFE Holdings, Nippon Steel, Sumitomo Metal and Kobe Steel are declining sharply.

Almost all key stocks from the non-ferrous metals, machinery and electric machinery sectors are currently trading in the red. Automobile, bank and insurance stocks are also trading with notable losses. And not much buying is taking place in construction, foods, textiles, chemicals and pharma stocks either.

In the currency market, the U.S. dollar traded in the lower 95 yen range early Tuesday in Tokyo, down from its levels in New York overnight. Currently, the yen is trading at 95.37 to the U.S. dollar.

On the economic front, the Economics and Social Research Institute, Japan will release the JPY Leading index today. Movements in these indicators are known to precede larger developments in the rest of the economy. Meanwhile, the Cabinet Office will release the Coincident Index that measures the current economic activity based on a composite of indicators that track current business conditions in Japan.

Among other markets in the Asia-Pacific region, only Shanghai bucked the trend and is trading flat. Mirroring the sell-off in the Australian and Korean markets, the other Asian benchmark indices are trading lower by as much as 2.7% and 2.3% respectively. In Taiwan, the Taiwan Weighted Average is down by a little over 2%. The key indices of Indonesia, Singapore and New Zealand are down by 1%-1.6%.

Most of the markets in the region ended Monday's session with moderate gains.

On Wall Street, stocks tumbled after the World Bank cut its forecast for the global economy and warned of a large decline in international capital flows amidst the financial market fragility. The World Bank said it now expects the world economy to shrink by 2.9 percent this year, larger than its earlier prediction of a 1.7 percent decrease.

The Dow closed lower by 200.72 points or 2.4 percent to 8,339.01, the Nasdaq fell by 61.28 points or 3.4 percent to 1,766.19 and the S&P 500 dropped 28.19 points or 3.1 percent to 893.04.

Major European markets closed firmly on the downside. The French CAC 40 Index and the German DAX Index both finished down by 3 percent, while the U.K.'s FTSE 100 Index dropped by 2.6 percent.

On Monday, crude oil plunged to its lowest close in 19 days as the World Bank's discouraging economic forecast led to worries over energy demand. Light sweet crude fell to US$66.93, a drop of US$2.62 for the session. Prices hit as low as US$66.25. The more-actively traded August crude contract fell US$2.52 to US$67.50 per barrel.

by RTT Staff Writer

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