Tokyo stocks drop

Tokyo stocks sank 2.01 percent Tuesday, following heavy losses on Wall Street and a plunge in oil prices, while a stronger yen hit exporters. The Nikkei 225 index at the Tokyo Stock Exchange shed 344.08 points to finish at 16,755.32, while the Topix index of all first-section shares closed 1.88 percent, or 25.92 points, lower at 1,353.37.
"Weakness in oil prices is contributing to the Wall Street slump. Global markets are still in a correction phase, with Japan feeling the fallout," SMBC Nikko Securities equities manager Hiroichi Nishi said. "In thinly traded markets, volatility tends to be higher," he added. Adding to the gloom, British banking giant HSBC said China's manufacturing activity shrank in December, with its closely watched purchasing managers' index (PMI) hitting a seven-month low.
In forex markets, the dollar weakened further against the yen owing to uncertainty caused by slumping crude prices, which are at their lowest levels in more than five and a half years. On Tuesday in Asia, US benchmark West Texas Intermediate for January delivery fell 38 cents to $55.53 while Brent crude for January eased 48 cents to $60.58 - both at levels last seen in mid-2009.
The plunge in prices has also hammered Russia, spooking investors. "Oil prices continue to slide, and that is now the chief worry to Russia, which is essentially an oil-exporting economy," Yoshihiro Okumura, general manager at Chibagin Asset Management, told Dow Jones Newswires. "The creeping fear is that Russia may default, reminding investors of the prior Greek fiscal panic, and require a bailout. Beyond that, a 'domino effect' of worsening fiscal conditions at other oil-exporting nations may take hold.
"Oil prices look far from settled at the mid-$50 level, so more pain may yet be in store." The greenback fetched 117.23 yen in Tokyo, down from 117.81 yen in New York Monday afternoon. In share trading, Sony fell 0.93 percent to 2,331.0 yen, Toyota lost 1.32 percent at 7,214.0 yen and Fast Retailing, operator of the Uniqlo clothing chain, sank 1.09 percent to 41,830.0 yen.
Hitachi fell 1.61 percent to 865.8 yen following news reports that it and Swiss engineering giant ABB are to set up a joint venture to market power transmission equipment in Japan. Bucking the downturn, Skymark Airlines soared 22.55 percent to 364.0 yen after Japan's leading Nikkei business daily said the firm was in tie-up talks with both All Nippon Airways and Japan Airlines. US stocks followed European markets down Monday on the back of the falling oil prices.