Tokyo: Nikkei drops as hawkish Fed bets unsettle investors

[TOKYO] Japan's Nikkei ended lower on Wednesday (Nov 24), as growth-oriented stocks took a beating amid investor concerns that the US Federal Reserve might speed up policy tightening to cope with broadening inflationary risks.

US President Joe Biden on Monday (Nov 22) nominated Federal Reserve Chair Jerome Powell for a second 4-year term and appointed Lael Brainard as vice-chair, leaving investors bracing for a more aggressive central bank.

"It's not that markets are reacting to these nominations per se. What's becoming clear is, for Powell, in his second term, the biggest task is dealing with inflation, rather than maximising employment," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

Richly valued US tech shares fell in the past 2 sessions, denting investors' risk appetite in the Japanese markets, which were closed on Tuesday (Nov 23) for a national holiday.

The Nikkei average dropped 1.58 per cent to 29,302.66, while the broader Topix lost 1.16 per cent to 2,019.12, led by a 1.85 per cent fall in Topix Growth index.

Internet firm Z Holdings, which has a price/earning ratio of more than 60 times, fell 4.6 per cent, while medical platform operator M3 lost 5 per cent.

Recruit Holdings shed 4.3 per cent, while SoftBank Group , which has a big exposure to global high-tech shares, dropped 3.3 per cent.

Semiconductor-related shares were also pounded, with Lasertec down 3.3 per cent, Advantest losing 4.1 per cent and Screen Holdings shedding 3.1 per cent.

On the other hand, some value stocks gained, with a weaker yen lifting carmakers while elevated US bond yields boosted banks.

Mitsubishi Motors rose 5.1 per cent, while Nissan Motor gained 4.4 per cent. Toyota Motor added 0.9 per cent.

Among financials, SMFG rose 2.1 per cent, while Mitsubishi UFJ gained 0.8 per cent.

Resource-related firms also gained, helped by a rebound in oil prices.

Trading house Marubeni jumped 1.9 per cent while rival Mitsui & Co added 1.7 per cent. Sumitomo Metal gained 1.8 per cent.

Elsewhere, Toshiba fell 1.6 per cent following a Reuters report that its second-largest shareholder objected to the Japanese conglomerate's plan to split itself into 3 companies.

REUTERS