Tokyo: Nikkei index tumbles more than 4% on China fears

[TOKYO] Tokyo's benchmark Nikkei index dived 4.05 per cent Tuesday, extending a global equities rout on fears over China's economy and a drop in commodity prices.

The Nikkei 225 at the Tokyo Stock Exchange dropped 714.27 points to 16,930.84 by the close, erasing all of its gains for the year. The index is down 18 per cent since authorities shocked world markets by devaluing China's yuan currency in mid-August.

The broader Topix of all first-section shares dived 4.39 per cent, or 63.15 points, to 1,375.52.

The slump in Japanese equities followed painful losses across markets in the US and Europe Monday, with resource firms especially weak as downbeat Chinese economic data hit prices of key commodities such as oil and copper.

The news hammered London-listed mining giant Glencore, which crashed 27.5 per cent in Hong Kong Tuesday morning after online brokerage Investec warned about the impact of soft commodity prices on the group as China's woes hit demand for raw materials.

"The slowdown in China is spreading to other Asian economies, Brazil and Australia, and weakness in emerging countries could echo throughout the overall world economy," Toshihiko Matsuno, chief strategist at SMBC Friend Securities, told Bloomberg News.

"We still don't know when market fears will end about China's slowdown, and because of this investors are turning to cash and safe assets." Foreign exchange dealers moved into safe-haven assets such as the yen, while higher-risk emerging market currencies took a hit before the release of US jobs data that could influence the timing of a Federal Reserve interest rate rise.

A strong reading in the employment data will add to calls on the Fed to move, putting pressure on emerging economies as investors withdraw their cash to seek better returns in the US.

In Tokyo forex trading, the dollar fell to 119.45 yen from 119.93 yen in New York, while the euro slipped to 134.62 yen against 134.83 yen.

A stronger yen is bad for the profitability of Japanese exporters.

AFP