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Japan's Nikkei index closes down 4.18%

Tokyo stocks plunged 4.18 per cent Tuesday after weak US manufacturing data sent Wall Street and the dollar tumbling, with the headline index shedding 14 per cent in a month after its huge rally last year.

TOKYO: Tokyo stocks plunged 4.18 per cent on Tuesday after weak US manufacturing data sent Wall Street and the dollar tumbling, with the headline index shedding 14 per cent in a month after a huge rally last year.

The Nikkei-225 index dived 610.66 points to 14,008.47, the worst one-day drop since June. The Topix index of all first-section shares fell 4.77 per cent, or 57.05 points, to 1,139.27.

"In this negative investing environment, players are merely looking for reasons to sell," said Yoshihiro Okumura, general manager at Chibagin Asset Management.

Just over a month after the Nikkei ended 2013 with a world beating 57 per cent rally -- its best annual run in more than four decades -- Japanese shares have entered in what analysts say is a correction phase.

The rise of the yen against the dollar has pushed down domestic stocks through the early weeks of 2014, after the currency's sharp decline through last year boosted the market.

The dollar bought 100.80 yen on Tuesday afternoon, slipping further from 100.94 yen in New York on Monday afternoon and well down from levels above 105 yen at the start of the year.

A weaker yen gives Japanese exporters the flexibility to cut prices of the goods they sell overseas and it inflates repatriated profits, while a stronger yen undercuts those gains.

The Tokyo market's decline on Tuesday came after a surprisingly weak US manufacturing report sparked another round of selling on Wall Street owing to concerns about the strength of the world's number one economy.

Emerging markets have also been shaken by fears of capital flight as the US central bank pulls back on its stimulus programme, which has been widely credited with fuelling an equities rally last year.

"Investors should steer clear of risk assets over the short term as the turmoil does not look like it will be over anytime soon," Credit Agricole said.

The Dow closed down 2.08 per cent, the S&P 500 fell 2.28 per cent and the Nasdaq shed 2.61 per cent.

The US data showed that manufacturing sector growth slowed sharply in January. The Institute for Supply Management's purchasing managers index sank to 51.3 from 56.5 in December, not far above the 50 level between expansion and contraction.

"This market weakness shows how traders felt so immune to the risks that have been masked by the abundance of easy-money central bank policies," said Tokyo-based hedge fund Symphony Financial Partners joint CEO David Baran.

Among major Tokyo shares, Toyota fell 5.67 per cent to 5,500 yen, Panasonic dived 6.84 per cent to 1,061 yen and Sharp lost 8.38 per cent to 317 yen.

Shortly after the market closed, the three firms reported strong nine-month earnings.

Sony, which reports its results on Thursday, fell 3.22 per cent to 1,530 yen.

Nintendo's hard-hit stock gave up early gains to end down 1.03 per cent at 11,900 yen.

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