The Nikkei Share Average drifted lower on Friday, marking its first weekly drop in five weeks. The decline was driven by slumping tech shares, attributed to elevated bond yields after economic data suggested that the U.S. Federal Reserve could end rate hikes.
The Nikkei ended the day 0.17% lower at 33,431.51, resulting in a 0.58% loss for the week. Among the 225 components of the Nikkei index, only 97 fell, while 125 climbed, and three were trading flat. Notably, technology was the only sector to decline in the Nikkei index, which speaks to the sensitivity of tech companies to changes in interest rates due to their high leverage.
Conversely, the broader, less tech-centric Topix rose 0.32% on Friday, but still suffered a 0.35% slump for the week. Interestingly, value stocks on the Topix gained 0.62%, while growth shares saw only a marginal 0.01% climb.
The rise in Japan’s long-term yields, adding 3.5 basis points to 0.705% on Friday, was in sync with an overnight rebound in U.S. Treasury yields, following three days of steep declines. Maki Sawada, a strategist at Nomura Securities, noted that this rebound in yields acted as a weight on stocks. “The Nikkei doesn’t look like it can retake 38,000 in the current environment,” she added. “Investors have been taking the opportunity to lock in profit.”
Despite logging its best monthly gain in November in three years and touching a fresh 33-year peak on Nov. 20 at 33,853.46, the momentum has since dissipated for the benchmark index. Of Nikkei’s five biggest drags on Friday, four were from technology shares. Notably, startup investor SoftBank Group declined by 1.66%, while chip-making equipment giant Tokyo Electron slid 0.73% and chip-testing machinery maker Advantest dropped 1.26%. Shares of TDK also slid 1.57%. The other was heavily weighted Uniqlo store operator Fast Retailing, which fell 1.04%.
Conversely, automakers drew support from the yen’s overnight pullback from multi-week highs to the dollar. Toyota and Honda gained close to 1.4% each. The biggest gainer on Friday was Seven & i Holdings, jumping 5.31% after the operator of 7-Eleven stores announced it bought the Australian 7-Eleven chain.
In summary, the Nikkei share average drifted lower on Friday, marking its first weekly drop in five weeks. Technology shares slumped on elevated bond yields after economic data suggested that the U.S. Federal Reserve could end rate hikes. The rebound in long-term yields acted as a weight on stocks. Despite the decline, topix value stocks saw gains, and automakers drew support from a weakening yen.
