Nikkei drops to near 3-week low as US-China trade fears hit

The Nikkei share average sank 1.9% to 20,353.40 in midmorning trade. (Reuters pic)

TOKYO: Japan’s Nikkei dropped to a near three-week low on Friday morning as renewed US-China trade fears curbed risk appetite, while dismal earnings results from Japan continued to sour sentiment.

The Nikkei share average sank 1.9% to 20,353.40 in midmorning trade, the lowest level since Jan 17.

For the week, the Nikkei is on track to post a 2% decline.

US President Donald Trump said he did not plan to meet with Chinese President Xi Jinping before the March 1 deadline set by the two countries for reaching an agreement.

“Investors are getting nervous since the market had been optimistic about a resolution of the trade dispute since the beginning of the year,” said Shusuke Yamada, chief Japan FX strategist at Bank Of America Merrill Lynch.

The Japanese market was already under pressure with bluechip companies cutting their forecasts.

According to Daiwa Securities, of 200 major companies that the brokerage covers, 117 companies had reported their third-quarter results as of Feb 6.

A total of 31 companies cut their annual forecasts on a pretax profit basis, Daiwa said.

On Friday, Nikon dived 11% after the company cut its annual operating profit forecast for its imaging business on struggling camera and chip equipment operations, which have been hit by falling demand in China.

Investors’ risk-averse stance dragged down cyclical stocks such as machinery firms which have large exposure to China.

Fanuc tumbled 3.7%, Komatsu tanked 3.1% and Hitachi Construction Machinery plunged 3.8%.

Bucking the weakness, Sony soared 5% after it announced a share buyback of 100 billion yen (US$910 million) – it’s first ever aimed at boosting shareholder returns.

The broader Topix declined 1.8% to 1,541.11, with all of its 33 subsectors in negative territory.

Declining issues outnumbered advancing ones 1,735 to 340.