The Tokyo stock market, teetering on the brink of 26-year lows, faces a major test as economic gloom threatens to send the Nikkei below the key 7,000 points level, dealers said Friday.
Eyes will be turned to Wall Street where a pivotal report on US unemployment was due to be released on Friday. "The US economy is in a very serious situation, as you can see with General Motors and Citigroup," said Masatoshi Sato, strategist for Mizuho Investors Securities.
GM warned it could face bankruptcy after its auditors voiced "substantial doubt" about the struggling automakers ability to stay afloat, while Citigroups share price dropped below one dollar for the first time. "If Wall Street falls, reacting to the US job data, Asia may follow and (the Nikkei may) dive below the key 7,000 point level," Sato said. Over the week to March 6, the Tokyo Stock Exchanges benchmark Nikkei-225 index dropped 395.32 points, or 5.22 percent, to end Friday at a fourth-month trough of 7,173.10, very near to Octobers 26-year closing low of 7,162.90.
The broader Topix index of all first-section shares fell 35.32 points, or 4.67 percent, to a fresh 25-year low of 721.39. One factor limiting the Tokyo markets decline is the prospects of government measures to support wilting stocks, but dealers were unsure how long the support would last. "Investors are not fully sure if the government can really implement the measures before the end of March" when the fiscal year finishes, Sato said.
Investors hopes for fresh action by China to boost its economy were also dwindling after Chinese Premier Wen Jiabao announced no fresh stimulus steps in an annual address. "As hopes of fresh Chinese economic stimulus measures fade, we dont see much more incentives" to buy, said Toshihiko Matsuno, research head at SMBC Friend Securities.
"We inevitably will have to look to news from Wall Street" for a lead, he said, warning that the Nikkei could drop to the 6,900-point level next week.
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