CORRECTED: UPDATE1: Nikkei sinks 2% in morning on weak Wall St., Ukraine invasion fears

© Kyodo News

Tokyo stocks plunged Monday morning, with the benchmark Nikkei down over 2 percent, tracking a tumble on Wall Street late last week on increased concerns over a potential invasion of Ukraine by Russia.

The 225-issue Nikkei Stock Average fell 725.74 points, or 2.62 percent, from Thursday to 26,970.34. Japanese financial markets were closed Friday for a national holiday. The broader Topix index of all First Section issues on the Tokyo Stock Exchange was down 39.61 points, or 2.02 percent, at 1,923.00.

Decliners were led by rubber product, precision instrument and electric appliance issues.

The U.S. dollar hovered in the mid-115 yen range as investors sought the perceived safety of the yen amid heightening tensions between the United States and Russia regarding Ukraine, dealers said.

At noon, the dollar fetched 115.47-48 yen compared with 115.47-57 yen in New York at 5 p.m. Friday.

The euro was quoted at $1.1342-1346 and 130.97-131.02 yen against $1.1341-1351 and 130.97-131.07 yen in New York late Friday afternoon.

Stocks shot lower from the outset, with the Nikkei falling below the 27,000 mark after U.S. national security adviser Jake Sullivan said Friday that a Russian invasion of Ukraine could take place "any day now," including during the Beijing Winter Olympics.

"Although an invasion is unlikely to have a direct impact on Japan, investors are concerned that such a move could raise raw material costs and lead to negative consequences for the economy," said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co.

Japanese stocks had been on a path to recovery following sharp falls last month, but the upward trend has been overridden by recent geopolitical risks and worries that the U.S. Federal Reserve will tighten monetary policy following the release of the U.S. consumer price index for January, he added.

Data released on Thursday by the U.S. Department of Labor showed inflation climbed 7.5 percent from a year earlier, exceeding the 7.2 percent market consensus and marking its steepest rise in nearly 40 years.

Meanwhile, investors were monitoring an operation by the Bank of Japan on Monday morning to buy an unlimited amount of 10-year government bonds at a fixed rate of 0.25 percent to curb a rise in long-term yields, which closed at a six-year high last week. It was the BOJ's first emergency bond buying operation since July 30, 2018.

On the First Section, declining issues outnumbered advancers 1,766 to 348, while 66 ended the morning unchanged.

At the Tokyo Commodity Exchange, Middle East crude oil futures briefly rose to 62,890 yen per kiloliter, their highest level since October 2014, on speculation that economic sanctions on Russia, in the event of a Ukraine invasion, would greatly reduce energy supplies.

Rubber product issues were hit by the crude oil surge on concerns that a rise in raw material costs would adversely impact revenue.

Bridgestone plummeted 468 yen, or 8.9 percent, to 4,790 yen, and Toyo Tire tumbled 123 yen, or 7.5 percent, to 1,517 yen.

Energy-related shares bucked the downward trend, with oil explorer Inpex soaring 69 yen, or 6.0 percent, to 1,212 yen, refiner Idemitsu Kosan gaining 110 yen, or 3.6 percent, to 3,135 yen, while Japan Petroleum Exploration jumped 217 yen, or 7.9 percent, to 2,961 yen.