Japan's Nikkei tracks Wall Street lower on Fed's rate hike bets

BY Reuters | ECONOMIC | 01/11/22 01:41 AM EST

By Junko Fujita

TOKYO, Jan 11 (Reuters) - Japan's Nikkei index ended about 1% down on Tuesday, tracking Wall Street's weak finish overnight amid caution about the U.S. Federal Reserve's possible rate increase as soon as March, while higher Treasury yields drove a sell-off in technology shares.

The Nikkei share average fell 0.9% to close at 28,222.48, while the broader Topix slipped 0.44% to 1,986.82.

"The Japanese market was dragged down by Wall Street's weak finish for two consecutive sessions and investor sentiment was cautious regarding U.S. monetary policy outlook," Shoichi Arisawa, general manager of the investment research department at IwaiCosmo Securities, said.

U.S. stocks fell overnight, as bets that the Fed could raise interest rates as soon as March led investors to pare risky assets and lifted the 10-year Treasury yield to a two-year high.

"It is hard to make active bets ahead of the CPI data to be released in the U.S.," Arisawa added.

U.S. December consumer inflation data is due to be released on Wednesday, with headline CPI seen coming in at a red-hot 7% on a year-on-year basis, boosting the case for an early increase in interest rates.

Technology shares dragged the Nikkei lower, with chip-making equipment maker Tokyo Electron (TOELF) losing 3.34%, global technology start-up investor SoftBank Group (SFTBF) falling 2.35% and sensor maker Keyence (KYCCF) down 7.89%.

Nippon Paint Holdings tumbled 12.28% after the maker of coating materials said its shareholders planned to sell its shares in a public market.

As investors continued to shift their money to larger companies amid rising rates in the U.S., high-end Japanese toaster maker Balmuda (BLMUF), which listed about two years ago, fell 5.8% after suspending sales of mobile phones that it unveiled in November.

Higher bond yields helped insurance and banks to advance 2.74% and 2.57%, respectively, while brokerages gained 2.19%.

(Reporting by Junko Fujita; Editing by Rashmi Aich)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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