Markets

Nikkei tumbles to 6-week low; growth woes, trade tensions hit big caps

TOKYO: Japanese stocks tumbled to a six-week low on Monday as a deeper-than-expected economic contraction at home in the third quarter and a sharp sell-off on Wall Street depressed sentiment.

Sino-US trade tensions were very much in the air, hitting global equities and pushing the Nikkei share average down 2.1 per cent to 21,219.50 – the lowest closing level since Oct. 29.

Japan's benchmark index has dived 13.2 per cent from a 27-year high hit in early October.

Nissan Motor Co was under the spotlight, as Tokyo prosecutors indicted the automaker along with its ousted Chairman Carlos Ghosn on Monday. Nissan's share prices ended 2.9 per cent lower.

The broader Topix fell 1.9 per cent to 1,589.81. Large cap stocks were hit hard, with the Topix Core 30 index falling to a level not seen since April 2017.

"The market saw positive catalysts a few weeks ago such as receding US-Sino trade tensions and easing worries about rising US yields, but stocks are still falling, so investors don't know what hope they should hold onto," said Shogo Maekawa, global market strategist at JPMorgan Asset Management.

US-China trade negotiations need to reach a successful end by March 1 or Washington will impose new tariffs, US Trade Representative Robert Lighthizer said on Sunday, clarifying that there is a "hard deadline" after a week of seeming confusion among President Donald Trump and his advisers.

Japanese gross domestic product shrank at a faster-than-forecast annualised rate of 2.5 per cent in July-September, worse than an initial estimate of a 1.2 per cent contraction, revised data showed on Monday.

"It suggests that companies are cooling on their capital expenditure plans. That's putting selling pressure on machinery stocks," said Eiji Kinouchi, chief technical analyst at Daiwa Securities.

Last week's arrest by Canadian officials of the chief financial officer of Chinese smartphone maker Huawei for extradition to the United States has also stoked worries a fresh flare-up in Sino-US tensions could crush any chances of a trade deal between Washington and Beijing.

Factory automation equipment makers Fanuc Corp dropped 1.9 per cent, while construction machinery makers Komatsu Ltd tumbled 5.2 per cent and Hitachi Construction Machinery lost 4.1 per cent.

Selling extended to shares of personal care goods makers, seen as more defensive than semi-conductor and machinery firms, that have seen strong demand from Chinese consumers.

"If you look at what stocks have sold off before, it shows that sentiment has become worse."

Cosmetics maker Shiseido Co dropped 2.2 per cent and Kao Corp was off 3.9 per cent.

Index-heavyweights Fast Retailing also shed 2.4 per cent.

Audio equipment maker Pioneer Corp plummeted 27 per cent as it started trading after news on Friday that the company will be bought by buyout firm Baring Private Equity and be delisted.

Japan Display lost 10.6 per cent after the Nikkei business daily reported that the company is cutting production of smartphone liquid crystal displays in December.

Original Article