Nikkei 225 Tumbles 3% in Tech-Led Selloff on Inflation Concerns

(Bloomberg) -- Technology stocks pulled Japanese equities lower, mirroring declines in the U.S. as surging commodity prices fueled concern over inflation.

The Nikkei 225 Stock Average slid more than 3% in its worst drop since Feb. 26, with SoftBank Group Corp. and Tokyo Electron Ltd. the largest contributors. Electronics and telecommunications were among the biggest drags on the Topix, with 32 of its 33 industry groups in the red. Panasonic Corp. highlighted stocks that declined after disappointing earnings forecasts.

“Earnings forecasts for Japanese companies aren’t that strong, while there isn’t any progress on the country’s vaccinations or its economic recovery, so there aren’t any positive factors to rely on,” said Takahiro Kusakari, chief investment officer at Sawakami Asset Management Inc.

Technology names led U.S. stocks lower Monday, while Treasury yields edged higher. The Philadelphia semiconductor index tumbled 4.7%, pushing it down more than 10% from its record high in early April. Nasdaq 100 futures dropped as much as 1.4% during Asian trading hours Tuesday.

After benefiting from lower interest rates and emerging as investor favorites last year amid the pandemic, global technology stocks are being hit by worries about high valuations and the potential impact on their future earnings and cash flows should rising price pressures prompt central banks to tighten monetary policies.

Japanese stocks have traded in a tight range this results season as investors parse company guidance. Meanwhile, coronavirus infections continue to rise across the nation and the pace of vaccinations has been slow compared with other developed nations.

“Japan will need to put the earnings results behind it, after which, investors may be relieved of concerns,” said Shogo Maekawa, a strategist at JPMorgan Asset Management in Tokyo. “But until then, it will be tough to see higher share prices.”

Summary

• Topix -2.4% to close at 1,905.92
• Nikkei 225 -3.1% to 28,608.59
• Yen -0.1% to 108.87 per dollar
• Electronics: Sony -3.5%, Keyence -2.4%, Tokyo Electron -4.1%
• Telecom group: SoftBank Group -6.5%, Nexon -3%, Nomura Research -3.6%
• Panasonic -5.8%

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