Asian Stocks Fall; Japan Slips Toward Bear Market

Asian markets fell Thursday after a big drop on Wall Street in the wake of a weak U.S. private-sector jobs report, reflecting caution ahead of Friday’s nonfarm payrolls data.

Japanese equities were tormented by more volatility that also affected the yen and bond yields, dragging stocks closer toward a so-called bear market.

The Nikkei Stock Average  shook off a weak opening to rebound earlier Thursday, but retreated again to finish the day 0.9% lower at 12,904.02, its first drop below the 13,000-point level since April 5. The broader Topix  fell 1.8%.

Both benchmarks had dropped more than 3% in the previous session, after Prime Minister Shinzo Abe’s blueprint for the nation’s long-term economic recovery fell short of some expectations.

The Nikkei Average, in particular, is off slightly more than 19% from the 52-week high it reached on May 23. A drop of 20% from that high would take the 225-stock benchmark into a technical bear market. The Topix is off 17% from its own 52-week high.

“The markets’ honeymoon with the Abe government has ended, but it seems premature to consider filing for divorce. … The worst of the correction in the Nikkei may soon be over,” said Capital Economics chief global economist Julian Jessop.

Shares of exporters were behind the day’s volatility as the U.S. dollar  fluctuated in a range between ¥98.83 to ¥99.46.

Shares of Sony Corp.   lost 2%, Sharp Corp.   skidded 5%, and Nintendo Co.   shed 2.5%, with each giving up their early gains.

The yield on the 10-year Japanese government bond fell 2 basis points to 0.84%, also giving up early gains, according to FactSet data.

Royal Bank of Scotland economists wrote to clients that the sharp drop Wednesday in the wake of Prime Minister Abe’s speech indicated investors had expected the government to propose a corporate tax break or subsidies to stimulate capital expenditure from the private sector.

But with the government’s fiscal policy efforts not proving enough to boost market sentiment, the government may have “no choice but to ask for the Bank of Japan to lead market momentum to be positive for the time being,” they said.

Other regional markets

Elsewhere in the region, the Shanghai Composite dropped 0.9% in afternoon trading, staying on course for a sixth successive day of declines.

Hong Kong’s Hang Seng Index and Taiwan’s Taiex dropped 1.1% each, while Australia’s S&P/ASX 200 retreated 0.9% in late trade.

South Korean markets were closed for a holiday.

The Asia losses came after the Dow Jones Industrial Average (TICKER:DJIA) tumbled more than 200 points overnight. After data released Wednesday showed a weaker-than-expected increase in private-sector jobs in May, markets were looking ahead to Friday’s comprehensive nonfarm payrolls data, often among the most market-moving statistics of the month.

“Friday’s non-farm payrolls will have a large bearing on whether stocks will reverse the recent pullback. … A strong nonfarm payroll result would likely be a catalyst behind stocks reversing the recent decline,” said Rivkin Securities global analyst Tim Radford.

The extended drop in Hong Kong and Shanghai also came amid lingering worries about Chinese economic growth, with the property and financial sectors losing further ground.

In Hong Kong, shares of China Overseas Land & Investment Ltd.   fell 3.1% and Hang Lung Properties Ltd.   dropped 2.9%, while Industrial & Commercial Bank of China Ltd.   shed 1.5%.

In Shanghai, Gemdale Corp.  lost 3.8%, and Poly Real Estate Group Co.  fell 3.3%, while Ping An Insurance Group Co.   lost 1%.

Meanwhile, the Australian market suffered from banks extending their losses after Wednesday’s report on the nation’s disappointing economic growth in the first quarter.

Shares of Westpac Banking Corp.  lost 1.4% and Australia & New Zealand Banking Group  each fell 0.9%.

Also lower were shares of Fairfax Media Ltd. , down 1.7% after the company projected a decline in full-year operating profit and launched a review of its product lineup.

Marketwatch