Roundup: Nikkei falls 1.71 pct on falling oil prices, yen's rise

The Nikkei stock index retreated for a second straight day Wednesday, falling 1.71 percent, as a continued plummet in crude oil prices sent Wall Street lower overnight and the yen higher versus the U.S. dollar, which soured the market mood and ensured investors were in a risk-off mood.

The Nikkei 225 fell 91.75 points to close the day at a near one- month low at 16,795.96, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange dropped 16.71 points, or 1.22 percent, to end at 1,357.98.

The Japanese yen hit a four-week high versus the U.S dollar, which was changing hands at 117.15 yen at the end of trade Wednesday, compared to 118.65 yen logged Tuesday, as investors backed away from riskier assets like stocks and redirected funds into the Japanese currency, known as a safe haven in times of economic uncertainty, which drives its value up versus its major counterparts.

Local traders here said investors' risk aversion Wednesday, although influenced by the global oil glut as crude oil prices extended their sell off, compounded by the UAE's oil minister confirming that OPEC would maintain its position on its output, was predominantly triggered by the strengthening yen.

A stronger yen, generally speaking, aside from denting exporter shares, the companies of which are reliant on a weak yen to boost overseas profits when repatriated as well as their competitiveness in foreign markets, often has a negative effect on sentiment and thus the broader market here and sees investors offload positions, realign funds into currency, or pile into defensive shares, which are non-cyclical stocks, or companies whose business performance and sales are not highly correlated with the larger economic cycle, such as food companies, utilities and pharmaceutical issues.

"The weaker dollar is more of a factor for hurting Japan stock- buying appetite than weak oil. But it is potentially ominous as a sign of slowing global growth," said Takashi Matsumoto, a senior strategist at Okasan Securities.

To elucidate, Masanori Ikunaga, from Sumitomo Mitsui Asset Management Co. said, "with volatility in commodity prices rising, investors have been adjusting their positions in numerous commodity products and the yen is getting a boost not only from waning risk sentiment but also falling oil, which yesterday showed Japan's trade figures improving."

On oil prices, West Texas Intermediate (WTI) for February delivery dropped 82 U.S. cents at 45.25 U.S. dollars a barrel in trade on Tuesday, while Brent crude, another key gauge for the resource, fell 99 U.S. cents to 46.44 U.S. dollars.

The gauges fell to their lowest since March and April 2009 respectively, the key data showed Tuesday.

Brokers here also opined that political uncertainty in Europe, specifically impending elections in Greece that could see the opposition party Syriza swing into power on Jan. 25 on a campaign a platform which calls for the debt-ridden country to leave the singe currency union in Europe, as part of new, rigorous austerity measures, also contributed to a circumspect market mood Wednesday.

Metal producers and energy issues were the biggest drags on the market as global prices dropped across the board overnight and JX Holdings slumped 4 percent to 420 yen and Showa Shell Sekiyu fell 2.8 percent to 1,131 yen.

Sumitomo Metal Mining tumbled 8.1 percent to close at 1,625 yen and Dowa Holdings retreated 4.9 percent. JFE Holdings dropped 5.3 percent and Nippon Steel & Sumitomo Metal Corp. also closed in negative territory, losing 3.7 percent.

Mitsubishi Materials, for its part, was another notable decliner, dropping 5.5 percent to close the day at 359 yen.

Among export-related issues affected by the yen's strength, top- automaker Toyota reversed 1.6 percent to end at 7,396 yen, while consumer electronics maker Panasonic Corp. retreated 2.2 percent to close at 1,339 yen.

High street electronics retailer Bic Camera, marked a bright spot on the market, however, adding 0.7 percent to 1,274 yen, following the firm announcing its net income jumped 58 percent to 1.39 billion yen in the Sept. to Nov. quarter from a year earlier.

Trading volume on Wednesday increased to 2.26 billion shares on the Tokyo Exchange's First Section, rising from Tuesday's volume of 2.20 billion shares, with declining issues trumping advancing ones by 1,413 to 365. Endi