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Market Update

Nikkei Drops 1.8%, Elevated Tankan Business Confidence Index

Author: Hiruki Nakamura
Last Update: 6:48 AM ET December 14 2015

4:30 PM Tokyo – The Nikkei plunged on Monday and tested six-week low following the deepening correction in oil and commodities. Industrial production in October jumped 1.4%. Japan and India signed several agreements involving bullet train and nuclear power plants.

The Nikkei average fell to a six-week low and weakening backdrop in the commodities market overshadowed trading in stocks.

Crude oil dropped to a new seven-year low and traded in New York as low $35.52 a barrel and traders looked for the price to test $30 level.

Also, the rout in copper, iron ore and coal also deepened as the demand from the construction sector in China continued to soften.

Even the positive reading of Tankan business survey and the strategic agreement between India and Japan could not improve the faltering market sentiment.

Tankan business quarterly survey, a closely watched confidence index of the Bank of Japan, showed that confidence at big manufacturers remained at 12, unchanged in the fourth-quarter from the previous three-month period.

The large companies plan to raise capital spending by 10.8% in the fiscal year ending March 2016, slightly down from the previously expected increase of 10.9%.

Despite expanding investment plans, companies show caution about the demand for exports in the next quarter, according to the Bank of Japan survey.

The seasonally adjusted industrial production in October jumped 1.4%, compared to 1.1% increase in September, the Ministry of Economy, Trade and Industry said.

On an annual basis, industrial output fell 1.4% in October, compared with 0.8% drop in the prior month. It was third consecutive monthly decline.

India and Japan signed a preliminary pact on civil nuclear cooperation after years of negotiations at the ninth annual summit between the two countries.

The two countries agreed on sharing technology, equipment and military information.

Japan will participate in large infrastructure projects in India, including the $5.5 billion Chennai-Bengaluru corridor project. Japan will provide $12 billion for constructing India’s first bullet train, as well as an incentive of $12 billion for Japanese companies investing in India.

The renminbi slipped to a four-year low against the U.S. dollar after the People’s Bank of China said it would measure the exchange rate against a broader basket of currencies.

In the trade-weighted basket, introduced late on Friday, the dollar accounts for 26.4% and the euro accounts for 21.4%.

The Nikkei 225 Stock Average declined 347.06 or 1.8% to 18,883.42 and the broader Topix index slumped 21.63 or 1.4% to 1,527.88.

The yen increased against the dollar to 121.22.

Stocks in Review

Kenedix Office Investment Corp closed unchanged at 544,000 yen after the real estate developer stated net sales in the year ending in October fell 2.8% from a year ago to 13.74 billion yen.

Net income in the year plunged 10.7% to 4.56 billion yen and earnings per share slipped to 11,273 yen from 12,859 yen in the same period a year ago.

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Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc