Nikkei Sinks as Geopolitical Fears and Virus Cases Rattle Investors

The Japanese equity market experienced a significant downturn on Friday, relinquishing the advances made in the prior session. The benchmark Nikkei 225 plummeted by nearly 600 points, dropping below the 26,000 threshold. This decline was driven by broadly negative signals from Wall Street overnight, as investors locked in profits following recent rallies and reacted to the ongoing escalation of the Russia-Ukraine conflict.

Investor anxiety was also heightened by a sudden surge in daily new domestic coronavirus cases, reversing a recent steady decline. Japanese Prime Minister Fumio Kishida announced that the government would extend its COVID-19 pre-emergency designations for 18 prefectures by an additional two weeks, lasting until March 21.

The Nikkei 225 Index fell 588.44 points, or 2.21 percent, to close at 25,988.83, having touched an intraday low of 25,774.28. This represents a sharp reversal from Thursday, when Japanese shares closed significantly higher.

Market heavyweight SoftBank Group declined nearly 5 percent, while Uniqlo operator Fast Retailing fell almost 3 percent. In the automotive sector, Honda dropped nearly 5 percent, and Toyota decreased by approximately 3 percent.

Technology stocks also suffered heavy losses, with Advantest dropping over 4 percent, Screen Holdings falling nearly 4 percent, and Tokyo Electron declining by more than 4 percent.

In the banking sector, Mizuho Financial slipped nearly 1 percent, Sumitomo Mitsui Financial fell over 2 percent, and Mitsubishi UFJ Financial decreased by almost 2 percent. Among major exporters, Panasonic lost nearly 3 percent, Sony declined by more than 4 percent, Mitsubishi Electric dropped over 1 percent, and Canon fell almost 1 percent.

The broader market saw widespread declines, with AGC and Sumitomo Chemical both plunging nearly 7 percent each. Hitachi Zosen and Nippon Sheet Glass fell more than 6 percent, while Fujikura and Toho Zinc slid over 5 percent each. M3, TDK, and Honda Motor also slipped nearly 5 percent each, and JTEKT, Nissan Motor, and Mitsubishi Motors declined by more than 4 percent each.

Conversely, some stocks bucked the trend. Mitsui O.S.K. Lines gained more than 5 percent, Ricoh added over 4 percent, and Mitsubishi Heavy Industries rose 3.5 percent.

In economic news, Japan’s seasonally adjusted unemployment rate for January came in at 2.8 percent, according to the Ministry of Internal Affairs and Communications. This exceeded the forecast of 2.7 percent, which had been expected to remain unchanged from December. The jobs-to-applicant ratio stood at 1.20, beating forecasts of 1.16, which was expected to be steady. However, the participation rate slipped to 61.7 percent, missing forecasts of 61.9 percent that had been expected to remain unchanged from December.

In the currency market, the U.S. dollar traded in the mid-115 yen range on Friday.

Wall Street exhibited extreme volatility on Thursday, extending recent erratic trading patterns. Major indices fluctuated around the unchanged line before ultimately closing in the red.

All major U.S. indices ended the day lower, with the tech-heavy Nasdaq underperforming its peers. The Nasdaq tumbled 214.08 points, or 1.6 percent, to 13,537.94, while the Dow declined 96.69 points, or 0.3 percent, to 33,794.66, and the S&P 500 fell 23.05 points, or 0.5 percent, to 4,363.49.

European markets also experienced substantial downward movements. The French CAC 40 Index slumped by 1.8 percent, the German DAX Index tumbled by 2.2 percent, and the U.K.’s FTSE 100 Index plunged by 2.6 percent.

U.S. crude oil prices drifted lower on Thursday, retreating from multi-year highs amid speculation of a potential nuclear agreement with Iran. West Texas Intermediate crude oil futures for April closed down 2.6 percent at $107.67 per barrel.

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