FRCOY Fast Retailing Company Ltd (PK)

By Gregor Stuart Hunter 

Japanese stocks suffered their biggest one-day drop in more than two months, adding momentum to a global selloff after the European Central Bank announced a smaller-than-expected burst of monetary stimulus.

Japan's Nikkei 225 Stock Average closed down 2.2%, the biggest one-day loss since Sept. 29. Shares fell 1.9% for the week, snapping a six-week string of gains.

While the ECB's measures, announced Thursday, included a further cut in its deposit rate and an extended bond-buying program, the moves were less aggressive than many investors expected.

The ECB's measures were a "huge disappointment" from ECB President Mario Draghi, said Kay Van-Petersen, Asia macro strategist at Saxo Capital Markets in Singapore.

Elsewhere, Australia's S&P/ ASX 200 fell 1.5%, South Korea's Kospi slipped 1% and Hong Kong's Hang Seng Index fell 0.8%.

The Shanghai Composite Index fell 1.7% as investors freed up cash in anticipation of 10 public listings, announced Thursday. Chinese officials said last month they would relaunch initial public offerings after a suspension in July, during the heat of the summer stock selloff.

The global selloff began after the ECB cut interest rates by 10 basis points to negative 0.3% and extended its quantitative easing program by six months to March 2017.

Momentum from U.S. and Europe--with the Dow Jones Industrial Average shedding 1.4% and the Stoxx Europe 600 falling 3.1% Thursday--snowballed in Asia on Friday, with the steepest losses in Japan.

A strengthening yen hurt Japanese exporters, which face diminishing value for repatriated earnings as the currency strengthens.

Toyota Motor Corp. fell 1.7%, and Mitsubishi Motors Corp. and Suzuki Motor Corp. both lost 2.8%. Fast Retailing Co., owner of the Uniqlo apparel chain, fell 3.1%.

The yen stabilized during the afternoon trading session in Asia at Yen122.68 against the dollar after trading as strong as Yen122.482 earlier Friday.

The euro strengthened as much as 3.5% after the ECB's announcement to $1.0982 against the U.S. dollar. The common currency is currently trading at $1.0893.

The losses for Japanese stocks comes days after the Nikkei crossed the 20000 mark, hitting a high of 20012.40 on Tuesday for the first time since August.

Some analysts expect Japan's losses to accelerate in the coming week.

"History shows the Nikkei Stock Average has tended to pull back by roughly 1,000 points about two weeks after it peaked," said Eiji Kinouchi, chief technical analyst at Daiwa Securities.

In China, investors sold shares ahead of the launch of the latest batch of new listings. A total of 28 are expected to come to market before the end of the year.

"The announcement of 10 new IPOs came sooner than market participants expected," said Guodu Securities analyst Xiao Shijun.

The smaller Shenzhen market fell 0.6% and the startup-heavy ChiNext Price Index, sometimes known as "China's Nasdaq," slid 0.6%.

The yield on the U.S. 10-year Treasury note was last up 13.7 basis points to 2.316%. Yields rise as prices fall.

Traders are also awaiting the release of nonfarm payrolls data for November later Friday, which could impact the Federal Reserve's decision to raise interest rates for the first time in nine years. Federal fund futures prices place a 79.1% probability of a rate increase in December.

Brent crude futures slipped 0.4% to $43.66 a barrel as oil ministers of Organization of the Petroleum Exporting Countries meeting in Vienna expressed pessimism about the prospects for a deal to change production quotas.

Gold prices were down 0.2% at $1,058.90 a troy ounce in Asia Friday.

Megumi Fujikawa and Yifan Xie contributed to this article.

Write to Gregor Stuart Hunter at gregor.hunter@wsj.com

(END) Dow Jones Newswires

December 04, 2015 03:34 ET (08:34 GMT)

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