Japan’s Nikkei slips as investors gauge Fed policymakers’ comments. #NikkeiLose

TOKYO: The Nikkei share average in Japan extended its losses on Thursday, continuing its retreat from a two-month high. The downbeat performance was due to investors positioning for a protracted period of high US interest rates, following the trend on Wall Street. The earnings season saw a mix of big winners and losers, with shares of materials maker Teijin and Pacific Metals posting gains of around 6% each after positive quarterly earnings, while Fujifilm declined by 2.6%.

The Nikkei ended the morning session at 27,479.86, down 0.5% but hovering around the 27,500 level it had reached in late-January. However, the index hit its highest point since mid-December at the start of the week, reaching 27,821.22 due to strong earnings results. The broader Topix index also slipped 0.2% to 1,980.07.

All three major US stock indexes dropped overnight, led by the tech-heavy Nasdaq, as Fed speakers backed the idea of more hikes and high rates for longer. The drop affected Japanese chip-related stocks as well, with chip-making equipment manufacturer Tokyo Electron declining by 2.3% and shaving 37 points off the Nikkei. Chip-testing equipment maker Advantest was next, subtracting 14 index points with a 2% slide.

According to Kazuo Kamitani, a strategist at Nomura in Tokyo, the market is shifting to the view that there won’t be any monetary loosening by the Fed this year, and some people who had been thinking the peak in rates would come in March now think there’s probably going to be another hike after that. US consumer price data on Tuesday will provide a crucial clue to Fed policy direction, and until then both US and Japanese stock markets are likely to be broadly directionless.

Of the Nikkei’s 225 components, 76 rose while 138 fell, with 11 remaining flat. The basic materials sub-index was the best performing sector, rising 0.8%, followed by a 0.5% gain for energy. Utilities were the laggards, with a 1% drop, while tech shares lost 0.7%.

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