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By Elaine Lies
TOKYO, June 9 (Reuters) - Japan's Nikkei stock index sank 2.1
percent on Monday, its largest fall in two weeks, as a surge in
oil prices and the biggest jump in the U.S. jobless rate in 22
years revived worries about the economy, with a stronger yen
undercutting exporters such as Canon Inc <7751.T>>.
Financial stocks skidded lower, tracking U.S peers that fell
on renewed worries the U.S. economy faces 1970s-style
stagflation, with Nomura Holdings Inc <8604.T>, Japan's largest
brokerage, down 4.6 percent.
One of the few bright spots was oil and gas field developer
Inpex Holdings Inc <1605.T>, which rose 3.1 percent.
"This isn't really a good time for bargain hunting, because
with stagflation fears increasing foreign investors are unlikely
to have much appetite to buy," said Masayoshi Okamoto, head of
dealing at Jujiya Securities.
"Blue chips have been hit pretty hard and the market is
relying on individual sectors, such as energy, for support."
U.S. crude <CLc1> jumped $11 on Friday, its biggest ever
one-day spike in dollar terms, while the U.S. May unemployment
rate rose to 5.5 percent, its highest level since October 2004.
Surging oil prices and the market's sharp fall revived
memories of 1970s stagflation, when prices rose but economic
growth was almost nil.
Though Japan, which until recent times was struggling with
deflation, has a slightly different take on inflation than some
markets overseas, market players said the worsening global
scenario would inevitably affect it.
"Japan doesn't have quite the same concerns about inflation
as the rest of the world, but it can't fight alone against the
flow if other markets are falling," said Hiroichi Nishi, general
manager of the equity division of Nikko Cordial Securities.
By midday, the Nikkei was underperforming the rest of Asia,
with the MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> down 0.74 percent by 0207 GMT.
The benchmark Nikkei was down 298.56 points at 14,190.88
after earlier falling to 14,117.79, its lowest point in more than
a week. The broader Topix <> fell 2 percent to 1,399.00.
BANKS AND BLUE CHIPS BATTERED
As a sector, financials fared poorly, with the securities
subindex <.ISECU.T> down 4.1 percent, the worst performer among
the subindexes. The banking subindex <.IBNKS.T> fell 2.8 percent.
Top lender Mitsubishi UFJ Financial Group <8306.T> slid 3.5
percent to 1,086 yen, followed by No.3 bank Sumitomo Mitsui
Financial Group <8316.T> down 3.2 percent at 907,000 yen and
Mizuho Financial Group <8411.T>, sliding 2.4 percent to 563,000
yen.
Blue-chip exporters were undercut by the dollar's weakness
against the yen <JPY=>, although many pared losses as the dollar
recovered later in morning trade.
Canon fell 4.2 percent to 5,460 yen, becoming one of the top
drags on the Nikkei 225 by volume weight. Industrial robot maker
and fellow exporter Fanuc <6954.T> fell 3.2 percent to 11,330 yen
and Honda Motor Co <7267.T> was down 3.4 percent at 3,730 yen.
Steel companies softened, with JFE Holdings <5411.T> down 4
percent at 6,070 yen on what Jujiya's Okamoto said was the
prospect of disappointed expectations.
"Some in the market have thought that steel companies could
perform well due to the agreement on price hikes with automakers,
but this rise in oil makes it more expensive to ship raw
materials, clouding the longer-term prospects," he added.
Inpex climbed 3.1 percent to 1.34 million yen and oil
explorer AOC Holdings <5017.T> soared 9.4 percent to 1,507 yen.
Trade was thin on the Tokyo exchange's first section, with
962 million shares changing hands, compared with last week's
morning average of 1.1 billion.
Declining stocks beat advancers by more than 6 to 1.
(Editing by Brent Kininmont)
