Japan's Nikkei slumps as oil, bond yields weigh on sentiment

Tokyo witnessed a sharp decline in Japan's Nikkei share gauge on Tuesday as global bond yields surged and oil prices rose, dampening investor sentiment. The benchmark Nikkei 225 dropped 1.23% to 65,070.58, marking a second consecutive decline. The broader Topix fell 1.75% to 4,040.16.

The market sell-off followed declines in US equity markets, with rising oil prices and Treasury yields heightening inflation concerns and raising doubts about the potential for sustained tight monetary policy. In Japan, government bond yields were hovering near multi-decade highs.

US and Iranian officials held separate meetings with mediators on Monday, as part of ongoing efforts to end a seven-month war that has disrupted energy markets. Wataru Akiyama, an equities strategist at Nomura Securities, noted that rising oil prices and the associated inflation are weighing on the stock market. Moreover, there is growing apprehension that AI-related shares, which have fueled the Japanese stock market's growth, may be overvalued given the current interest rate environment.

On the Nikkei, 26 stocks advanced while 199 declined. The largest percentage losers included NEXON, which plunged 14.57%, followed by Idemitsu Kosan, down 5.1%, and Chubu Electric, which fell 4.46%. Conversely, Tokai Carbon led the gainers with a 3.29% increase, followed by Screen Holdings, up 2.65%, and Lasertec, which rose 2.48%.