TOKYO (Thomson Financial) - Japanese shares are expected to open lower
Monday, tracking declines on Wall Street on Friday due to mounting concerns
about the credit crisis after the Federal Reserve and JPMorgan Chase & Co
decided to rescue Bear Stearns.
JPMorgan and the central bank agreed to extend loans for 28 days to Bear
Stearns, the fifth-largest US investment bank and the one hit hardest by the
subprime mortgage crisis.
The move came after two hedge funds managed by Bear Stearns failed last
summer, setting off a credit crisis that has swept up banks and brokerages
around the globe.
In backing up JPMorgan, the Fed dusted off a rarely used, Depression-era
provision to provide loans. It also said it was ready to step in to fight an
erosion of confidence in the nation's largest financial institutions.
"The US market will continue to be hostage to fresh developments related to
the subprime loan and credit crisis," Mizuho Research Institute analyst Koji
Takeuchi said.
"As the US investment banks are scheduled to announce their quarterly
results, investors are focusing on whether the losses related to the subprime
crisis will increase further and whether the losses will spill over to other
investment products as well," he said.
Takeuchi said while the market expects a 75 basis point rate cut at this
week's Federal Open Market Committee meeting on March 18, if the rate cut comes
in below this level the market may react negatively.
Domestically, investors are also expected to focus on the yen after the
Japanese currency rallied to below the 99 yen level -- its highest level over 12
years.
"The appreciation of the yen, combined with surging crude oil prices, has
strengthened concerns about the profits of exporters, making them susceptible to
selling," Takeuchi said.
The Japanese market may also be hit by fresh geopolitical concerns following
the biggest uprising against Chinese rule in Tibet in nearly 20 years.
Eighty people have been confirmed dead, the Tibetan government-in-exile said
in Dharamsala, contradicting the official account in China's state-run media
that there were just 10 fatalities.
On Wall Street on Friday, the Dow Jones Industrial Average closed down
194.65 points or 1.60 percent to 11,951.09. The Dow had been down as much as 313
points.
The Nasdaq composite index fell 51.12 points or 2.3 percent to 2,212.49.
The Chicago-traded Nikkei futures contract settled at 12,110 points, down
from at 12,390 at the Osaka Securities Exchange on Friday and suggesting a weak
start for the market.
On the Tokyo bourse on Friday, the blue-chip Nikkei 225 index was down
191.84 points or 1.5 percent at 12,241.60, while the broader Topix declined
22.64 points or 1.9 percent to 1,193.23.
Ahead today, the Ministry of Economy, Trade and Industry will release its
tertiary industry activity index for January ten minutes before the opening bell
and the Cabinet Office will report its leading and coincident indexes for
January in the afternoon.
Stocks to watch include Hitachi Ltd after the electronics giant said it now
expects to post a net loss of 70 billion yen in the current fiscal year ending
this month as it steps up restructuring of its loss-making plasma panel and
plasma TV business.
(1 US dollar = 99.09 yen)
yasuhiko.seki@thomson.com
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