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Japanese stocks end lower on caution around virus impact on earnings

SYDNEY, April 9 (Reuters) – Tokyo shares ended lower on Thursday, even as Wall Street peers rallied, as investors remained cautious and worried about the impact of the COVID-19 pandemic on corporate Japan’s earnings.

The benchmark Nikkei average eased 0.04% to 19,345.77, despite Wednesday’s big rally on Wall Street.

The Dow Jones Industrial Average and the S&P 500 advanced 3.4% each, while the Nasdaq Composite gained 2.6% on hopes that the pandemic may be peaking and Bernie Sanders’ decision to suspend his presidential campaign.

“It is a little premature to call an official peak in the outbreak, even if some optimism is warranted,” said Esty Dwek, head of global market strategy at Natixis Investment Managers.

Japan recorded 503 new coronavirus infections on Wednesday, its biggest daily increase since the outbreak, underscoring the struggle of the authorities to contain the disease without imposing a mandatory lockdown.

The Nikkei’s volatility index, a measure of investors’ volatility expectations based on options pricing and considered to be a fear gauge, slid to as low as 38.85, its lowest level in more than two weeks.

“The recent fall in the volatility level does not reflect bullish sentiment. Rather, it reflects investors’ reluctance to trade,” said Yasuo Sakuma, chief investment officer at Libra Investments.

The overall activity was indeed subdued, with the volume of shares traded on the main board valued at 2.30 trillion yen ($21.15 billion), its lowest level since February 21.

Bic Camera Inc tumbled 8.6% after the electronics retailer slashed its group profit forecasts for the current business year through August, citing the impact from the virus outbreak.

“We will look closely at earnings estimates as they are revised down. Markets may not be factoring in enough adjustment,” said Natixis’s Dwek.

The Nikkei’s heavyweight SoftBank Group Corp added 1.1% after Oyo Hotels and Homes said on Wednesday the SoftBank-backed Indian startup is furloughing some employees to cut costs to survive through the coronavirus pandemic.

Nissan Motor Co Ltd rose 1.4% after the Nikkei newspaper said the automaker has requested a 500 billion yen commitment line from major lenders as sales were battered by the COVID-19 outbreak.

The broader Topix fell 0.6% to 1,416.98, with three-thirds of the 33 sector sub-indexes on the exchange finishing in negative territory.

Land transport, securities and foods were the worst three performing sectors on the main bourse.

Startup and small-cap stocks bucked the market’s overall weakness due to bargain hunting by retail investors, with the index of startup-heavy Mothers market climbing 3.8% and the small-cap Jasdaq index adding 1.0%. ($1 = 108.7500 yen) (Reporting by Tomo Uetake; Editing by Jacqueline Wong and Uttaresh.V)

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