By Junko Fujita
The average Japanese Nikkei stocks fell on Thursday after a strong rally in the previous session, with the initial euphoria over a fragile two-week ceasefire in the Middle East giving way to more cautious market outlooks.
Investor sentiment weakened after Israel launched its heaviest strikes on Lebanon on Wednesday, killing hundreds and prompting threats of retaliation from Iran. Tehran also indicated that it would be “unreasonable” to continue negotiations for a permanent peace deal with the United States.
The Nikkei .N225 dropped 0.73% to 55,895.32, ending a four-session rally. The broader Topix index .TOPX slipped 0.9% to 3,741.47.
Nikkei 225 futures contracts on the Chicago Mercantile Exchange NIYcm1 crossed the 57,000 level overnight.
In the previous session, the Nikkei jumped 5.4% to its highest level in over a month on hopes of the reopening of the Strait of Hormuz after U.S. President Donald Trump agreed to a two-week ceasefire with Iran.
The six-week conflict had virtually paralyzed traffic through the strait, a chokepoint for about 20% of global oil and liquefied natural gas shipments, pushing up global energy prices.
“Investors have calmed down and started to wonder if the peace talks would actually succeed,” said Takamasa Ikeda, senior portfolio manager at GCI Asset Management.
“Oil prices have risen again, weighing on the stock market.”
Chipmakers and artificial intelligence-related stocks declined, with Advantest 6857.T and SoftBank Group 9984.T losing 1.67% and 1.23% respectively.
Shares of Fast Retailing 9983.T, the parent company of Uniqlo, reversed initial gains to close down 0.46%.
Out of the over 1,600 stocks traded on the main market of the Tokyo Stock Exchange, 18% rose, 80% fell, and 1% remained unchanged.
(Automated translation by Reuters using machine learning and generative AI, please refer to the following disclaimer: https://bit.ly/rtrsauto)
(Updating closing prices)
