Nikkei in Tokyo Plunges 1.8%; Crude Oil Futures Rise 5%

Nigel Thomas
22 Feb, 2011
New York City

The benchmark index in Tokyo plunged after oil prices rose sharply and in a surprise move Moody

[R]5:00 PM Tokyo – The benchmark index in Tokyo plunged after oil prices rose sharply and in a surprise move Moody’s lowered its outlook on Japan’s debt. Crude oil futures increased 5% and tensions in Middle East and North Africa flare up and protests in Libya escalate. Automakers, shipping lines banks and real estate developers led decliners.[/R]

Stocks in Japan declined and crude oil futures surged as tensions flare up in the Middle East and North Africa. A rating agency downgraded Japan’s sovereign debt outlook.

Foreign oil companies have begun to evacuate its non-essential staff from Libya as Col. Muammar Gaddafi’s grip on power is weakening and people take control of Benghazi, second largest city in Libya.

Crude oil futures surged $5.22 a barrel to close at $90.22 and the yen traded at 82.88 to a dollar.

The Nikkei 225 Stock Average dropped 1.8% to 10,664.70 and the broader index Topix declined 1.8% to 956.70. Real estate developers, automakers and pharma companies led the decliners.

Moody’s Investors Service downgraded ahead of vote on the budget and placed the government debt on a review with a negative outlook. Sixteen ruling party lawmakers are opposed to budget austerity measures that may lead to a new government in Japan.

In a surprise move, Moody’s downgraded on Japan’s As2 rating from stable to negative following a similar downgrade by the S&P to cut Japan’s rating from AA to AA-.

Stock Movers

Oil shipping companies declined as tensions in the Middle East rise. Nippon Yusen K.K. declined 2.8% to 378 yen and Kawasaki Kaisha Ltd fell 3.2% to 367 yen and Mitsui O.S.K. Lines Ltd fell 3.8% to 533 yen.

Construction companies linked to the Middle East also fell. Chiyoda Corp dropped 4.3% to 721 yen and the engineering company JGC Corp fell 3.8% to 1,808 yen.

Banks also closed lower after Moody’s put Japan’s debt on a watch. Mitsui Financial Group Inc dropped 4.5% to 3,050 yen and Mitsubishi UFJ Financial Group declined 3.6% to 453 yen. Credit Saison and Sumco Corp dropped by more than 4%.

Aeon Company declined 1% after it announced to buy a stake in retailer Parco Co and increase its stake to 12.31%.