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Nikkei in biggest one-day drop in 2 months as downing of Malaysia jet hits mood
July 18, 2014 / 2:25 AM / 3 years ago

Nikkei in biggest one-day drop in 2 months as downing of Malaysia jet hits mood

* Geopolitical concern could have mid-term impact - fund
    * Oil companies outperform on rising oil prices

    By Ayai Tomisawa
    TOKYO, July 18 (Reuters) - Japan's Nikkei share average
dropped to a one-week low on Friday morning and posted its
biggest one-day fall in two months as investors turned risk
averse on news that a Malaysian Airlines passenger jet was shot
down near the Ukraine-Russia border.
    The Nikkei fell 1.7 percent to 15,110.45 in
mid-morning trade, the lowest since July 11 and was the biggest
one-day percentage drop since May 7.
    The index has breached 15,130.25, the 23.6 percent Fibonacci
retracement on the rise from May 21 to July 4.
    A Malaysian jet was brought down over eastern Ukraine on
Thursday, killing all 298 people aboard and sharply raising the
stakes in a conflict between Kiev and pro-Moscow rebels in which
Russia and the West back opposing sides.
    A Ukrainian official said it was caused by a missile fired
at the plane. Both sides denied involvement in the crash, which
came just a day after the U.S. ratcheted up sanctions against
    Many market players said that the news shocked the market
immediately and made investors jittery, but in the mid-to-long
term, investors' eyes will turn to the U.S. economic recovery
and Japanese corporate earnings for the April-June quarter.
    "Investors were taking risks and chasing the market higher
until the news soured sentiment, so it could also mean that it
has become a good reason to take quick profits," said Toru
Ibayashi, executive director at UBS Wealth Management.
    He added that it is difficult to say how much impact the
incident will have on companies' earnings.
    In contrast, others voiced concerns, saying that the
geopolitical complexity in Russia and Ukraine could affect the
market in the mid-term depending on developments in the region.
    "Amid a recovery in the Japanese market led by the strong
U.S. economy amid expectations for rising U.S. interest rates,
this geopolitical concern can cloud such optimism in the
mid-term," said Hiromitsu Kamata, head of Japanese equity target
department at Amundi Japan.
    Kamata said that the plane crash can be perceived as an
isolated event in the financial market, but it also has the
potential to lead to a bigger turmoil, and the market should not
underestimate the impact.
    Exporters sank after the dollar slid nearly 0.5 percent
against the yen overnight to post its biggest one-day loss since
early April. It last traded at 101.205 yen. A break below
101.06 yen would take the dollar to a two-month low.
    Toyota Motor Corp dropped 1.1 percent, Honda Motor
Co shed 1.7 percent and Panasonic Corp 
declined 1.7 percent.
    Oil shares outperformed the market after oil prices began
rising as new U.S. sanctions announced on Wednesday took aim at
some of Russia's biggest companies for the first time.
    Inpex Corp rose 1.2 percent, while Japan Petroleum
Exploration was flat.
    The broader Topix dropped 1.1 percent to 1,259.51,
and the JPX-Nikkei Index 400 shed 1.1 percent to

 (Editing by Jacqueline Wong)

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