Japan stocks crumble as bond market rout wreaks havoc

  • Reuters
  • Stock Market News
Japan stocks crumble as bond market rout wreaks havoc
Credit: © Reuters.

By Hideyuki Sano and Stanley White

TOKYO, Feb 26 (Reuters) - Japanese shares slumped on Friday, logging their biggest daily decline in nearly a year, after a spike in global bond yields spooked investors already uneasy about the market's stretched valuation.

The Nikkei average .N225 ended down 3.99% at 28,966.01, hitting its lowest level in almost three weeks. The broader Topix .TOPX fell 3.21% to 1,864.49. Both indexes posted their biggest single-day fall since April last year.

All of the Tokyo Stock Exchange's 33 industry subindexes were in the red, with electronic machinery makers .IELEC.T , pharmaceuticals .IPHAM.T and real estate companies .IRLTY.T falling more than 3%.

Semiconductor-related shares, one of the main leaders of the market's rally to 30-year highs, succumbed to heavy selling, after U.S. chip shares .SOX fell 5.8%.

Sumco 3436.T fell 5.59%, while Lasertec 6920.T shed 5.33%. Advantest 6857.T dropped 7.51%, while Screen Holdings 7735.T lost 6.53%.

Precautions about rising inflation and a weak U.S. bond auction boosted global bond yields, dampening investors' appetite for risk assets.

Analysts pointed to market's sharp rise as contributing to its current slide as well. "In a nutshell, I think the stock market had risen a bit too much," said Soichiro Monji, chief strategist at Nishimura Securities.

Rising bond yields also hit assets that have been considered as an alternative to low-yielding bonds. The TSE's index of real estate investment trusts (REITs) .TREIT fell 2.84%

Market players are now awaiting whether the Bank of Japan, which has refrained from buying stock exchange traded funds (ETFs) so far this month, will purchase them later in the day.

The central bank in its next policy meeting is expected to signal it will make its ETF purchases more flexible.

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