|Nikkei in bear market territory, Hang Seng and Europe equities slide
Tokyo's Nikkei stock index plunged into bear market territory as a strong yen and worries about an end to central bank stimulus stoked bloodletting on Japan's premier bourse after weeks of wild volatility.
The benchmark Nikkei dived 6.35 percent, or 843.94 points, to 12,445.38 by the close, slicing about 20 percent off its peak last month above 15,600, and meeting the typical definition of a bear market, AFP reports.
The broader Topix index of all first-section shares fell 4.78 percent, or 52.37 points, to 1,044.17.
Europe's main stock markets slid at the start of trading following sharp losses in Tokyo. London's benchmark FTSE 100 index dropped 1.22 percent to 6,222.41 points, Frankfurt's DAX 30 shed 1.47 percent to 8,023.37 points and in Paris the CAC 40 retreated by 1.24 percent in value to stand at 3,746.62 compared with Wednesday's closing levels.
Stocks in Hong Kong slipped 2.19 percent at the close today.
The benchmark Hang Seng Index fell 467.62 points to 20,887.04 on turnover of HK$87.74 billion.
In Shanghai stocks closed down 2.83 percent on the first day back after a three-day market holiday. The benchmark Shanghai Composite Index fell 62.54 points to 2,148.36 on turnover of 79.71 billion yuan.
Today's drop in th Nikkei was largely attributed to jitters over an end to central bank stimulus, particularly the US Federal Reserve's monetary easing, which has been credited with propping up global equity markets.
However, cracks have also begun to emerge in a plan by Japanese Prime Minister Shinzo Abe to power the world's third-largest economy, a blueprint dubbed Abenomics.
Foreign investors had piled into the market since late last year as the government and Bank of Japan set about a policy prescription of big spending and aggressive monetary easing, which pushed down the yen.
The weak currency benefits Japanese exporters by making them more competitive overseas and tends to push up Tokyo stocks.
“We have seen such wild fluctuations lately that few investors want to press on with buying,'' said Hirokazu Kabeya, senior strategist at Daiwa Securities.
“It's a kind of a chicken-and-egg situation – volatile markets keep buyers away and the absence of buyers leads to market volatility. We are trapped in a negative spiral right now.’’
Investors tend to flock to the safe-haven yen in times of turmoil and uncertainty, weighing on the stock market.
“The Nikkei falls because the dollar/yen falls, then the dollar/yen falls further because the Nikkei has fallen – markets are in this vicious circle,'' said Atsushi Hirano, head of FX sales Japan at Royal Bank of Scotland.
The greenback fetched 94.03 yen in Tokyo afternoon trade, from 95.88 yen in New York late Wednesday and from the high 98-yen range in Tokyo at the start of the week. It was above 100 yen in recent weeks.
US stocks fell sharply in volatile trade on Wednesday .The Dow posted its first three-day losing streak this year amid worries about central banks' stimulus plans after the Bank of Japan held off fresh measures on Tuesday.
The blue-chip Dow shed 0.84 percent to 14,995.23.
A senior trader at a major Japanese bank said further losses in the Nikkei would be a negative signal from investors on the Japanese premier's economic policies.
“An eventual breach of 12,000 for the Nikkei could see forex rates and share prices back to levels seen before the BoJ's decision'' in early April, he said. “If that happens, we'll just be left with higher bond yields.''