Japanese stocks dropped on Wednesday morning after weakness in U.S. shares and a stronger yen hurt sentiment, while sliding oil prices dragged down the mining sector. The Nikkei share average fell 0.5 percent to 19,589.25 in midmorning trade. Overall market sentiment is sour after the sterling stumbled as a new poll found British Prime Minister Theresa May’s Conservative Party risks falling short of an overall majority in next month’s national election.
The vote in Britain, political uncertainties in Italy and doubts over debt relief for Greece have enhanced the yen’s safe haven appeal, putting a drag on Japanese exporters’ revenues. The dollar fell to near two-week low of 110.665 yen and last traded at 110.93 yen. “Japanese stocks are cheap, with the PER at 14 times their projected earnings, but the strong yen is keeping foreign investors from investing,” said Yutaka Miura, a senior technical analyst at Mizuho Securities.
Banking and insurance shares, which hunt for higher yielding products, were sold after U.S. Treasury yields fell to their lowest levels in more than a week on Tuesday. Mitsubishi UFJ Financial Group and Mizuho Financial Group both declined 1.0 percent, while T&D Holdings dropped 0.9 percent. Mining stocks underperformed after oil prices fell about 1 percent on Tuesday, on signs of resurgent crude output in Libya and concerns that output cuts by the world’s big exporters may be too small to reduce a global glut.
Inpex Corp stumbled 2.3 percent and Japan Petroleum Exploration Co fell 1.9 percent. Outperforming the market was Panasonic Corp, which soared 2.3 percent as investors took heart from its briefing to analysts on the previous day, when it talked about its bright mid-to-long term growth strategy.
The company said that its automotive and industrial parts unit is expected to see the largest growth in terms of sales in the year ending March 2022, to 2.5 trillion yen, compared to about 1.3 trillion yen for the last fiscal year ended March 2017. The company also said it hopes to become one of the world’s top 10 auto parts manufacturers in terms of sales by then. The broader Topix shed 0.2 percent to 1,570.06 and the JPX-Nikkei Index 400 declined 0.2 percent to 13,983.63. (Editing by Simon Cameron-Moore)