Nikkei-Topix Weakens, Oil Rises Test Japanese Sentiment
Japanese stocks closed lower on Thursday as investors returned to caution following conflicting statements regarding the US-Iran ceasefire talks. The uncertainty pushed up oil prices, further weighing on sentiment in the energy-sensitive Japanese market.
The Topix index fell 0.2% to 3,642.80, while the Nikkei 225 fell 0.3% to 53,603.65. The decline was broad-based: of the 1,655 Topix stocks, 1,022 fell, 574 rose, and 59 were unchanged. Tokio Marine Holdings was the biggest drag, falling 3.4%.
The pressure came from rising oil. Brent rose 2.2% to around US$104.50/barrel, rebounding from the previous day's decline. The US reiterated that negotiations were ongoing, but Iran rejected President Donald Trump's approach. This contradiction increases the risk that disruptions in the Strait of Hormuz will persist for a longer period, leading the market to increase the energy risk premium.
Nomura Securities believes that the conflicting statements increase the likelihood of an "effective blockade" due to military tensions being prolonged. Under these conditions, oil price movements have become the dominant factor driving Japanese equities, primarily through imported inflation and corporate margin pressure.
Investors have also begun to increase their hedging against potential further declines. Market participants are reportedly using short selling and options to anticipate sharp downward movements if the conflict drags on and energy volatility increases again.
The insurance and electrical equipment sectors led the Topix decline. Prior to today's correction, insurance stocks had risen for two consecutive days after Tokio Marine announced a US$1.8 billion investment from Berkshire Hathaway. However, profit-taking strategies are again evident: when the market strengthens amid high uncertainty, investors tend to lock in profits more quickly.
Source: Newsmaker.id
