Japanese stocks tumble after failed bond auction

<p>The auction failed to attract investors.</p>

Japanese stocks tumbled today (February 3rd) as the results of the new ten-year Japanese government bonds auction were weaker than expected.

The Nikkei share average closed 1.3 per cent lower at 17,335.85 points, the broader Topix lost 1.2 per cent to 1,392.39 and the JPX-Nikkei Index 400 slid 1.1 per cent to 12,640.20.  

There was weak demand for the Ministry of Finance's Y2.4 trillion (£13.5 billion) bond auction, which produced the lowest accepted price of 99.42, compared to market expectations of around 100.00. 

"The auction results triggered worries that those who have long positions on bonds may unwind their positions and have a big impact on other asset classes," Nobuhiko Kuramochi, a strategist at Mizuho Securities, told Reuters.

Recent disappointing China and US data also weighted on the mood. A survey showed activity in China's manufacturing sector shrank in January for the first time in more than two year, coming in at 49.8 and surprising market watchers who were expecting expansion. China's final HSBC Purchasing Managers' Index (PMI) also fell to 49.7, indicating a contraction. 

In addition, US economic growth slowed sharply to a less-than-expected 2.6 per cent in the fourth quarter of 2014.

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