Tokyo: Nikkei falls on weak US, China data, trade frictions

[TOKYO] Japan's Nikkei fell on Thursday as weak US and Chinese economic data and Sino-US trade frictions soured sentiment, while banks tumbled on weak earnings reports.

The Nikkei share average shed 1.1 per cent to 20,969.69 points by midmorning.

Adding to worries about the trade war which has already dragged down the Japanese market by 5.4 per cent this month, the US Commerce Department said on Wednesday it is adding China's Huawei Technologies and 70 affiliates to its so-called "Entity List".

On Wednesday, US retail sales posted a surprise drop in April as consumers pulled back on their spending, according to the US Commerce Department. A separate report from the Labor Department showed US industrial production also unexpectedly dipped in April.

"Most investors expected that the US economy would be strong, so it shocked the market, especially after weak China's economic data," said Hiroyuki Ueno, a senior strategist at Sumitomo Mitsui Trust Asset Management.

China reported surprisingly weaker growth in retail sales and industrial output for April on Wednesday, raising fresh questions about the health of its economy as the US ramps up trade pressure.

"It sends a cautionary signal on the soundness of (China's) domestic economy, when external uncertainty has been elevated," economists at Bank Of America Merrill Lynch wrote in a research note.

"In addition to a modest hit to exports, negative spillovers to business confidence are likely in the near future. In the near term, policy makers will likely keep policy easing in place and be more accommodative until after a trade deal."

The broader Topix fell 0.8 per cent to 1,531.92, with most cyclical sectors in the red. Domestic-demand sectors such as utility, construction and railway attracted buyers.

Exporters fell, with Fanuc falling 1.3 per cent, Murata Manufacturing shedding 2.2 per cent and Advantest Corp tumbling 5.4 per cent.

Mega banks were sold, with Mitsubishi UFJ Financial Group dropping 3.4 per cent to 495.5 yen, the lowest level since November 2016, after the bank reported an 11.8 per cent fall in its net profit for the last fiscal year ended March 2019.

Mizuho Financial Group shed 1.9 per cent to 161.2 yen, the lowest since last December, after its net profit tumbled 83 per cent to 96.6 billion yen for the last fiscal year, though it forecast a net profit of 470 billion yen for this fiscal year, more than four-fold recovery on the year.

Japan Display plunged as much as 11 per cent after it posted a ninth straight quarterly loss. Its net loss for the three months ended March was 98.6 billion yen, versus a 147 billion yen loss a year earlier.

REUTERS