June 12, 2020 / 6:39 AM / 25 days ago

Japanese stocks drop to 1-1/2-week low on Wall Street rout, firmer yen

SYDNEY, June 12 (Reuters) - Japanese shares skidded to 1-1/2-week lows on Friday after Wall Street dived on fears that a resurgence of COVID-19 infections could stunt the pace of reopening economies.

The benchmark Nikkei average settled 0.75% lower at 22,305.48, its weakest close since June 1, erasing some of the earlier losses on a positive lead from U.S. futures.

For the week, the Nikkei was down 2.4%, logging its biggest decline in seven weeks.

U.S. shares plummeted on Thursday as investors reacted to renewed fears of a pandemic resurgence and digested dour economic forecasts from the Federal Reserve, with all three major indexes losing well over 5%. However, E-Mini futures for the S&P 500 were last quoted up 1.4%.

In the currency market, the safe-haven yen stood firm on renewed pessimism over a quick economic recovery, with the dollar/yen hitting 106.58 overnight, a level unseen in a month.

As a stronger yen hurts Japanese manufacturers’ profits made abroad when repatriated, shares of export-oriented automakers remained under pressure, with Honda Motor shedding 1.8% and Subaru falling 1.2%.

“The ongoing steep correction shows you what type of investors and money is playing in these markets and how fragile the rally was,” said Takeo Kamai, head of executions services at CLSA in Tokyo.

The broader Topix lost 1.15% to 1,570.68, also its lowest close since June 1, with all but one of the 33 sector sub-indexes on the Tokyo exchange finishing lower.

Highly cyclical mining, metal products and non-ferrous metals were among the worst performing sectors on the main bourse.

Oil and gas exploration companies Inpex and Japan Petroleum Exploration fell 2.4% and 4.1%, respectively, as oil prices extended heavy overnight losses.

Nichiigakkan advanced 3.7% after Hong Kong-based investment fund LIM Advisors said in a letter to management that Bain Capital’s tender offer “substantially” undervalued the nursing home operator. (Reporting by Tomo Uetake; Editing by Subhranshu Sahu)

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