Japan's Nikkei Ends Volatile Week Down 6%

Japan's benchmark stock index moved out of bear market territory on Friday following comments by Japan's Government Pension Investment Fund (GPIF) that shook Tokyo financial markets minutes before the close of trade.

Check out the nikkei chart below. It is in alot of trouble at the moment.

nikkei chart

GPIF said that it would raise its weighting of domestic stocks to 12 percent from its current 11 percent and lower its weighting of Japanese government bonds (JGBs) to 60 percent from 67 percent.

The news saw the Nikkei rally as much as 1 percent to briefly cross the 13,000 mark before swinging wildly between gains and losses.

The rest of Asia's equity markets accelerated their pace of losses following the Nikkei's volatility. Australia's S&P ASX 200 index closed at a new four-and-a-half-month low, South Korean shares hit a new six-week low and the Shanghai Composite dropped over 1 percent.

For the week, Asia's worst-performing index was the Nikkei. Its losses exceeded 6 percent while Shanghai equities came in second with losses of 4 percent.


The U.S. nonfarm payrolls report for May is released later in the day and could offer clues as to how long the Federal Reserve intends to keep buying bonds to stimulate the economy. If the data disappoint, the monthly $85 billion bond purchases are likely to be left intact, analysts say.


Japan's index fell to as low as 12,660 in the morning session – marking a 20.5 percent downside from the peak of 15,942 hit in late-May. A bear market is characterized by a 20 percent or more decline in a market.

Market heavyweights reversed earlier losses and led afternoon gains. Fast Retailing surged 5.5 percent, while Tokyo Electric Power surged over 8 percent.

Ben Colette, head of Asian equities at Sunrise Brokers in Hong Kong, said he wouldn't recommend reentering the market until a clearer base is formed.

"You need to let the market find a support. If we find stability around 12,500, traders and investors will put money to work. What you don't do right now is start running into this and start filling up the truck," he said.

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