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Nikkei drops to 2-week lows as U.S. bond yields soar, but bank stocks rise

Kitco News

* Regional banks soar on reform hopes

* Nikkei falls 1.4 pct for the week

* Tech shares fall, financials continue to rally

By Ayai Tomisawa

TOKYO, Oct 5 (Reuters) - Japan’s Nikkei fell to its lowest close in two-weeks on Friday, tracking weakness on Wall Street as rising U.S. Treasury yields have dimmed the allure of most stocks except financial ones.

The Nikkei share average ended 0.8 percent lower to 23,783.72, the weakest close since Sept. 20. Earlier this week, the index traded above the 24,000 mark and hit 27-year highs.

The banking sector surged 1.1 percent on Friday and was the board’s biggest gainer with Chiba Bank surging 3.1 percent and Shizuoka Bank 2.8 percent.

Japanese banks - and particularly regional ones - gained after advisers to Prime Minister Shinzo Abe presented a rough draft on policy ideas that included consolidation of regional banks.

But overall, analysts said the stock market had become overbought in a very short timeframe, leaving shares vulnerable to profit-taking.

“The Japanese market is in a difficult position,” said Masayuki Doshida, senior market analyst at Rakuten Securities.

“Japanese shares tend to track strong performances in the U.S. where the economy is strong. But at the same time, when people become risk-averse on fears that many emerging market economies would suffer due to rising U.S. interest rates, Japanese shares are sold too.”

Doshida said that when Japanese shares have matched gains in of U.S. ones, it is tough to expect further rises unless there’s a positive factor specific to Japan.

He added that whether the Topix, which has hit eight-month highs, can rally to new highs depends on first-half earnings. On Friday, the Topix dropped 0.5 percent to 1,792.65.

The Nikkei fell 1.4 percent for the week after posting three straight weekly gains, rising 7.9 percent in total.

U.S. Treasury yields kept climbing to multi-year highs on Thursday’s latest round of strong U.S. economic data. Now the focus is Friday’s September payrolls report.

Japanese tech shares and suppliers to Apple Inc fell after their U.S. counterparts lost ground overnight.

Tokyo Electron declined 2.6 percent, Advantest Corp tumbled 4.1 percent and Murata Manufacturing shed 3.9 percent.

Insurers and banks, which hunt for high-yielding assets such as foreign bonds, continued to rally after the yield on the U.S. benchmark 10-year note hit 3.232 percent, making its largest one-day jump since the 2016 U.S. presidential election.

T&D Holdings rose 1.5 percent, MS&AD Insurance gained 1.2 percent and Mitsubishi UFJ Financial Group added 1.2 percent. ($1 = 113.9400 yen)

Reporting by Ayai Tomisawa, editing by Eric Meijer

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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