Japan's Nikkei inches lower ahead of Powell's speech

BY Reuters | ECONOMIC | 02/07/23 01:45 AM EST

TOKYO, Feb 7 (Reuters) - Japan's Nikkei index pared gains to inch lower on Tuesday, as investors awaited a speech by U.S. Federal Reserve Chairman Jerome Powell, while a slew of corporate earnings rendered the market directionless.

The Nikkei share average ended 0.03% lower at 27,685.47, snapping a fourth straight winning session, after trading most of the session in positive territory.

The broader Topix rose 0.21% to 1,983.40.

Investors were keeping a close eye on a speech by the Fed Chair due later in the day, for any change in the central bank's rhetoric, after data last week showed robust job growth, as well as strong services activity in January.

"The market lost direction as the earnings season continues in Japan. There was a mixture of buying and selling based on outcomes," said Chihiro Ohta, assistant general manager at the investment research and investor services at SMBC Nikko Securities.

"Also market participants want to know what Fed Chair Powell will say later in the day."

Uniqlo brand owner Fast Retailing (FRCOF) lost 0.52%, dragging the Nikkei the most. Technology investor SoftBank Group (SFTBF) lost 1.01% and staffing agency Recruit Holdings (RCRRF) fell 1.63%.

JFE Holdings (JFEEF) tanked 8.47% to become the worst performer after Japan's second-biggest steelmaker lowered its forecasts for crude steel output and full-year profit.

The steel sector lost 2.95% to become the worst performer among the 33 industry sub-indexes.

Stronger growth in Japanese wages have driven expectations that the BOJ would alter its ultra-rate policy, said Yugo Tsuboi, senior strategist at Daiwa Securities.

Government data showed Japanese real wages rose for the first time in nine months thanks to robust temporary bonuses, but uncertainty remains on whether pay hikes will continue to sustain Japan's economic recovery.

The banking sector rose 2.51% to be the best performer.

Mitsubishi UFJ Financial Group (MUFG) and Sumitomo Mitsui Financial Group (SMFG) rose 3.2% and 2.1%, respectively. (Reporting by Junko Fujita; editing by Uttaresh.V, Nivedita Bhattacharjee)

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.