Nikkei ends down 1.7 pct after Wall St. rout, Fed eyed

Traders say retail investors seen bargain hunting, foreign investors fleeing stock markets; US Federal reserve decision awaited.

Tokyo Stock Exchange employee reacts to fall 311 (R) (photo credit: REUTERS/Kim Kyung-Hoon)
Tokyo Stock Exchange employee reacts to fall 311 (R)
(photo credit: REUTERS/Kim Kyung-Hoon)
TOKYO - The Nikkei average closed down 1.7 percent on Tuesday in heavy volume, cutting its losses on bargain hunting after tumbling more than 4 percent in the wake of a plunge on Wall Street and a downgrade of US sovereign debt.
Investors are now turning their focus to a Federal Reserve meeting later on Tuesday for indications of whether the US central bank might ease monetary policy further, market participants said.
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While foreign investors fled stocks after Wall Street tumbled in the wake of Standard & Poor's downgrade of US sovereign debt, retail investors bought sharp decliners and futures players bought on dips, traders said.
Some traders also cited talk of the Fed making an emergency statement before the US market opens as one factor in the rebound, though most were dismissive of the rumor.
The benchmark Nikkei ended down 153.08 points at 8,944.48, after falling as low as 8,656.79 in heavy trade. That was just above an intraday low marked on March 17 of 8,639.56.
Analysts said if the Nikkei fell below that point the next support was at 8,227.63, an intraday low posted on March 15.
The broader Topix lost 1.6 percent to 770.39.
Tokyo shares are widely seen as undervalued as those listed on the Topix are trading just below book value, while those on Wall Street's benchmark S&P 500 are at about 2.0 times book value, analysts said.
"I still don't think people are running out of here in panic. If there's such a thing as an orderly decline (this is it)," said a trader for a foreign brokerage in Tokyo. "Some people think we're massively oversold and we're due for a bounce."
On Monday, panic selling on Wall Street brought the S&P 500's worst day since December 2008, with every stock in the benchmark index ending in negative territory.