Nikkei falls to 1-1/2-week low as financials weaken; Softbank down

* SoftBank contributes hefty negative points to Nikkei index

* Insurers and banks underperform

By Ayai Tomisawa

TOKYO, March 21 (Reuters) - Japan's Nikkei share average fell to a 1-1/2-week low on Tuesday morning as financial stocks were battered after U.S. yields fell, while index-heavyweight SoftBank tumbled and weighed on the index.

The Nikkei dropped 0.5 percent to 19,432.71 in midmorning trade after a public holiday on Monday. Earlier, it hit as low as 19,337.22, the lowest level since March 9.

Financial stocks lost ground after U.S. yields rose as Chicago Federal Reserve President Charles Evans reinforced the perception that the U.S. central bank won't accelerate the pace of its interest rate hikes.

Evans' public comments were among the first since the U.S. central bank lifted its policy rate a notch last week, as expected.

"Participants in the Japanese market have become cautious again and their wait-and-see stances will likely last until the next U.S. rate hike," said Kazuhiro Takahashi, an equity strategist at Daiwa Securities.

That said, he also said that markets may find short-term catalysts from Japan Inc.'s earnings forecasts for the next fiscal year, which will be out in early May when companies report their full-year earnings for the year ended March 2017.

SoftBank Group Corp (SFTBF) dropped 2.2 percent and contributed a hefty negative 21 points to the Nikkei index after the Wall Street Journal reported that the company scrapped a planned $100 million investment in a smartphone startup founded by the creator of Google's Android software, citing people familiar with the matter.

"SoftBank's aggressive investment stance in the U.S. has nothing to do with its earnings growth or stock fundamentals, but it affects sentiment," said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management. "Since SoftBank is one of the 'Trump beneficiary stocks' which had risen earlier, people seem to be taking profits on this report."

Led by founder Masayashi Son, SoftBank has made a string of surprising acquisitions and investments over the past months, which include an all-cash deal to buy asset manager Fortress Investment Group.

Son also promised a $50 billion investment and 50,000 new jobs in the United States after meeting U.S. President Donald Trump in early December. SoftBank shares have jumped 36 percent since Trump won the U.S. presidential election in November.

Insurers Dai-ichi Life Holdings stumbled 1.9 percent and Sompo Holdings (NHOLF) fell 1.4 percent. Mitsubishi UFJ Financial Group (MTU) slipped 1.8 percent.

Exporters were mixed, trimming earlier declines after the dollar rose against the yen during Asian trade. Toyota Motor Corp (TM) was down 0.1 percent, Nissan Motor Co (NSANF) gained 0.5 percent and Panasonic Corp (PCRFF) shed 0.3 percent.

The broader Topix dropped 0.2 percent to 1,563.28 and the JPX-Nikkei Index 400 shed 0.2 percent to 13,986.79.

(Editing by Sam Holmes)

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