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Nikkei ends at 4-month low on U.S. inflation fears, COVID-19 worries

This Oct. 1, 2020 file photo shows the Tokyo Stock Exchange. (Mainichi)

TOKYO (Kyodo) -- Tokyo's Nikkei stock index dropped for the third straight day Thursday to close at its lowest level in four months on rising concerns over U.S. inflation and the continued spread of coronavirus variants in Japan.

    The 225-issue Nikkei Stock Average ended down 699.50 points, or 2.49 percent, from Wednesday at 27,448.01. The index closed at its lowest level since Jan. 6 following the third largest point drop this year. The broader Topix index of all First Section issues on the Tokyo Stock Exchange finished 28.91 points, or 1.54 percent, lower at 1,849.04.

    The benchmark lost more than 7 percent in the three days through Thursday. Decliners were led by precision instrument, information and communication and electric appliance issues.

    The U.S. dollar hovered in the upper 109 yen range, as buying on expectations for a wider interest rate gap between the United States and Japan was offset by selling to lock in gains after the U.S. unit rose overnight to its highest level in a month, dealers said.

    At 5 p.m., the dollar fetched 109.66-68 yen compared with 109.65-75 yen in New York and 108.79-80 yen in Tokyo at 5 p.m. Wednesday.

    The euro was quoted at $1.2085-2087 and 132.53-57 yen against $1.2066-2076 and 132.32-42 yen in New York and $1.2133-2134 and 132.00-04 yen in Tokyo late Wednesday afternoon.

    The yield on the benchmark 10-year Japanese government bond rose 0.015 percentage point from Wednesday's close to 0.090 percent as the debt was sold following overnight losses in the U.S. Treasury market on worries that the Federal Reserve may reduce its massive bond purchases sooner than expected, dealers said.

    Bond yields move inversely to prices.

    Shares lost ground throughout the day, as strong U.S. consumer price data fueled inflation fears and concern that the Fed will be forced to bring forward monetary stimulus tapering, brokers said.

    The U.S. consumer price index released overnight unexpectedly rose 4.2 percent in April from a year earlier, its fastest pace since September 2008.

    The Tokyo market inherited the momentum from Wall Street where traders worried inflation would lead to higher U.S. long-term interest rates and drive more investors to bond market, pushing down technology issues that had led stock prices higher, said Koichi Fujishiro, a senior economist at the Dai-ichi Life Research Institute.

    "As for an individual factor for Tokyo, there is also concern about slower progress in coronavirus vaccinations," he said. Japan lags behind other advanced countries in its vaccine rollout amid a continued increase in infections with the spread of more contagious variants.

    On the First Section, declining issues outnumbered advancers 1,800 to 335, while 57 ended unchanged.

    Nikkei heavyweight SoftBank Group sank 713 yen, or 7.8 percent, to 8,467 yen on expectations the investment and technology conglomerate will be hit by weaker stock markets.

    Among tech shares, semiconductor equipment maker Tokyo Electron sagged 2,180 yen, or 4.7 percent, to 44,300 yen and electronics maker Sony Group dropped 311 yen, or 3.0 percent, to 9,989 yen.

    An increase in the number of COVID-19 patients with severe symptoms to record levels weighed on railway operators due to worries about more people refraining from going out and further shrinkage in travel demand.

    East Japan Railway declined 182 yen, or 2.5 percent, to 7,212 yen and Central Japan Railway lost 365 yen, or 2.3 percent, to 15,385 yen.

    Trading volume on the main section fell to 1,408.35 million shares from Wednesday's 1,529.39 million shares.

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