Japan’s Nikkei slides to three-week low amid stronger yen impacting auto sector

Japan's Nikkei share average dipped to its lowest point in almost three weeks, on Monday,  facing pressure from a robust yen that negatively impacted the earnings outlook for the country's exporters. 

Automakers took the lead in declines during the midday recess, causing the Nikkei to lose 0.64 per cent and reaching 33,216.05, with an earlier slide of 1.22 per cent to 33,023.04, the lowest since November 14.

The broader Topix also experienced a decline of 0.78 per cent. Among the Tokyo Stock Exchange's 33 industry groups, transport equipment suffered the most, falling by 2.38 per cent. The yen rose to a nearly three-month high of 146.235 per dollar on Monday before settling back around 146.65.

Analysts noted the apparent influence of currency market movements on stock behaviour. Kazuo Kamitani, a strategist at Nomura Securities, remarked that while there is a perception that stocks are being affected by currency market shifts, it could be challenging for yen strength to reach 144 or 143 per dollar, suggesting a potential near-term peak.

Despite the current challenges, Kamitani pointed out that the Nikkei's 25-day moving average is strongly upward, and positive drivers could propel the index towards 34,000 at any moment. The Nikkei had reached a 33-year peak on November 20 at 33,853.46.

In Monday's trading, 164 out of the index's 225 components registered declines, with 59 rising and two remaining flat. 

Mazda emerged as the worst-performing auto stock with a 3.93 per cent drop, followed by Toyota, down 2.26 per cent, and Nissan, down 3.29 per cent. Online company CyberAgent experienced the biggest percentage decline with a 4.52 per cent slump.

Semiconductor-related shares also underperformed, with Tokyo Electron and Advantest, the two major contributors in chip-making equipment, witnessing declines of 0.9 per cent and 1.58 per cent, respectively. 

Meanwhile, real estate was the only Nikkei sector to advance, with Sumitomo Realty & Development and Tokyo Tatemono both rising 1.8 per cent.

(With Reuters Inputs)