TOKYO – Tokyo shares died Tuesday, sending the benchmark Nikkei Stock Average to sliding more than 1,000 points to its lowest finish in 20 months, as US political chaos creates investor problems over the health of the global economy.
Other Asian markets that were open on Christmas Eve also met sales, but the losses were more modest. The Shanghai Composite Index ended down with 0.9% while in Taiwan, the reference closed the Taiex index down 1[ads1].2%.
Nikkei finished the day at 19,155.74, down 1,010.45 or 5.0%, ending lower for the fifth straight session. It was the index's first closed under the key 20,000 levels since September 15.
Japanese financial markets were closed Monday for a national holiday.
The relative resilience of the Tokyo stocks this year made them more vulnerable to selling than Chinese stocks, said Mutsumi Kagawa, chief global strategist at Rakuten Securities. Signs of Beijing that attract Washington's claims of things like intellectual property, have also raised hopes of easing trade tensions and providing support for Chinese and Taiwanese stocks, adds Kagawa.
Investors rushed to the security of Japanese government bonds and pushed 10-year returns to 0%, the lowest since September 2017, against 0.04% late Friday.
Markets in Hong Kong, South Korea and much of Southeast Asia were closed on Tuesday for the Christmas holidays with markets in Europe and the United States
The immediate catalyst for sales was US political confusion among a partial public closure over the federal budget ban and US President Donald Trump's repeated attacks on the central bank's monetary normalization policies. The chaos gave investors several reasons to get out of risky assets as they face a weak global economy.
"The return on the stock market reflects growing investor concerns about the world economy," says investment strategy at Mitsubishi UFJ Morgan, Norihiro Fujito. Stanley Securities. The US economy may look strong now, but it will be overtaken by a slowing global economy next year, he said.
The trade war between the United States and China has dampened growth in China, which in turn has affected the growth of economies that depend on it like Germany's and emerging Southeast Asian economies.
Trump has added to US political uncertainty by tweeting on Monday that "The only problem our economy has is the Fed", in a new attack on the US Federal Reserve's monetary measures, raises the fears of US central bank independence and the dollar's role as global currency .
US Treasury Secretary Steve Mnuchin also rattled markets after announcing Monday that he had called the CEOs of the six largest US banks to assure them of access to liquidity. The announcement was ongoing, instead a suspicion that there is a problem with the US banking sector.
Nobel laureate economist Paul Krugman tweeted on Monday, "This is amazing. It's as if Mnuchin was trying to panic over something no one was worried about until this release."
Analysts predict the downturn in the market.
"Weaker stock prices and higher yen are likely to hurt business sentiment," warns Strategy Director Shigeki Sakaki of Nomura Asset Management Co. Sakaki quoted a possible weakness in earnings from Japanese trading houses among global economic downturns and weaker commodity prices. "Nikkei recovers to the 20,000 level, if that should happen, will not be sustainable" as the deteriorating corporate base makes the shares less attractive, he added.
Night in New York, the Dow Jones Industrial Average lost 653.17 points, or 2.9%, to close at 21,792.20 – the lowest end since September 2017.
The risky climate has given yen purchases as sent the Japanese currency to a four month high against the dollar to 110.5 in the morning session. Yen tends to appreciate when markets run on expectations that Japanese investors will try to reduce exposure to risky investments and repatriate money.
At noon in Tokyo, the dollar was quoted at 110.13-15 yen compared to 111.28-29 late Friday.