Tokyo stocks close lower as rising U.S. Treasury yields dents sentiment

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TOKYO, March 31 (Xinhua) — Tokyo stocks closed lower Wednesday as investor sentiment was dented by a rise in long-term U.S. Treasury yields which sent U.S. stocks lower overnight.

The 225-issue Nikkei Stock Average dropped 253.90 points, or 0.86 percent, from Tuesday to close the day at 29,178.80 on the final trading day of fiscal 2020.

The broader Topix index of all First Section issues on the Tokyo Stock Exchange, meanwhile, lost 23.86 points, or 1.21 percent, to finish at 1,954.00.

A rise in U.S. Treasury yields overnight weighed on U.S. shares and triggered a circumspect mood in Tokyo trading, local brokers said, as higher bond yields tend to turn investors away from riskier stocks.

They added that the yield on the benchmark 10-year U.S. Treasury bond hitting its highest level since January last year overnight led to concerns that interest rates may increase further commensurate with a recovery in the labor market.

March employment data is set to be released by the U.S. Labor Department on Friday, brokers highlighted.

“A sense of caution against rises in U.S. long-term interest rates was strong,” Koichi Fujishiro, a senior economist at the Dai-ichi Life Research Institute, was quoted as saying.

While the U.S. Federal Reserve has indicated its benchmark interest rate will remain near zero through the end of 2023, some market strategists have questioned whether investors believe this will be the case.

“Investors may lean toward questioning whether the Fed would really not raise the interest rate for three years,” said Fujishiro.

Also weighing on the market Wednesday was continued fallout from U.S. hedge fund Archegos Capital defaulting on margin calls.

Financial issues continued to be pressured, although opinions remained mixed as to the extent of the problem.

“Opinion is divided between those who say this is a problem confined to one hedge fund and those who warn of even more losses,” Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank, was quoted as saying.

“It is perfectly understandable that investors would want to lighten some of their positions in financial shares,” Sera said.

By the close of play, bank, rubber product and consumer credit issues comprised those that declined the most.

Mitsubishi UFJ Financial Group fell 3.9 percent, a day after it said it may incur losses of 300 million U.S. dollars due to transactions with an unnamed U.S. client and its British subsidiary.

Nomura Holdings who earlier in the week said it may be facing 2 billion U.S. dollars in losses from a U.S. client, dropped 2.9 percent.

Other banks losing ground included Mizuho Financial Group losing 3.4 percent by the close.

Automakers were a bright spot on the market, however, owing to the yen’s retreat versus the U.S. dollar, with Toyota Motor Corp. adding 3 percent, while Subaru closed 1.1 percent higher.

Issues that fell outpaced those that rose by 1,650 to 491 on the First Section, while 45 ended the day unchanged.

On the main section on Wednesday, 1,325.88 million shares changed hands, edging down from Tuesday’s volume of 1,340.76 million shares.

The turnover on the third trading day of the week came to 2,908.41 billion yen (26.28 billion U.S. dollars). Enditem

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