Roundup: Nikkei plunges 2.51 pct. following surge, market eyes Fed's rate hike

Tokyo stocks plunged Thursday with the Nikkei index falling 2.51 percent as poor machinery order data invited investors to offload shares following the market's historic jump yesterday on hopes for more easing in China and corporate tax cuts in Japan.

The 225-issue Nikkei Stock Average plummeted 470.89 points from Wednesday to close the day at 18,299.62, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange fell 27.85 points, or 1.85 percent, to finish at 1,479.52.

A fall in U.S. shares overnight coupled with soft machinery order data released in the morning here contributed to a circumspect market mood from the get-go, local traders said, pointing to the latter showing that Japanese core machinery orders tumbled 3.6 percent in July from the previous month, according to the government's statistics.

The data set, widely regarded as a leading indicator of corporate capital investment, showed that company's in Japan had trimmed spending as the market was deemed unstable and the outlook uncertain, market analysts here said.

The Cabinet Office cut its assessment of core orders, saying a pickup is seen as stalling, prompting some market players to question whether the central bank here would consider unveiling further easing measures, and, in terms of the global market, despite an uptick in employment, whether recent market turmoil might create enough of an excuse for the U.S. Federal Reserve to hike its rate at an earlier juncture. "While uncertainty remains high about China and global economy, poor orders, particularly at the service sector, reflect persistent weakness in domestic demand," said Takeshi Minami, chief economist at Norinchukin Research Institute, with regard to domestic machinery order data released at the start of play and a harbinger of slumping business spending in the months ahead.

As for the Fed's rate hike, analysts here said that the market could swing until the outcome of the Fed's next policy meeting next week, at which hints about its imminent rate hike may be divulged. "Volatility is likely to continue until a U.S. Federal Reserve policy meeting next week," said Maki Sawada of Nomura Securities Co.'s investment research department. "The lack of clarity about whether we see a September rate hike or not is behind the current volatility. We should expect a very volatile market until the Fed meeting clears up uncertainty about monetary policy," added Mitsushige Akino, an executive officer at Ichiyoshi Asset Management Co., who said that Wednesday's surge was merely short-covering.

Shares got a brief lift in the afternoon as the U.S. dollar rose to 120.70 yen from 120.54 yen in New York, following news that Liberal Democratic Party lawmaker Kozo Yamamoto, known to be one of the key minds behind Prime Minister Abe's reflationary policies in twine with the central bank's efforts, recommended that the Bank of Japan vote to conduct additional monetary easing at its Oct. 30 policy meeting.

But while consumer electronics maker Sony found traction on the news, gaining 0.62 percent to close at 3,133 yen, other export- related issues that usually benefit from a weaker yen closed down, with top automaker Toyota skidding down 4.21 percent to end the day at 7,150 yen.

The worse-than-expected factory order data, saw related issues close lower and robotics maker Fanuc dropped 0.63 percent to 20, 440 yen, while toolmakers DMG Mori tumbled 5.0 percent to 1,628 yen and Okuma lost 4.2 percent to close at 907 yen.

Oil related issues also came under pressure Thursday as the price of crude retreated and exploration giant Inpex sank 4.1 percent to 1,147.50 yen, while refiner JX Holdings fell 4.2 percent to end the day at 459 yen.

Among heavily-weighted issues, Fast Retailing, owner and operator of the Uniqlo chain of high street apparel stores, slumped 5.6 percent having surged 10 percent on Wednesday, marking its biggest gain in two years.

Trading volume on Thursday dropped to 2.44 billion shares on the Tokyo Exchange's First Section, down from Wednesday's volume of 2.79 billion shares, with declining issues outnumbering advancing ones by 1,329 to 497. Endi