Japan Nikkei extends losses on growth worries

Headline indices of the Japan share market were lower on Wednesday, 5 December 2018, as investors continued booking profits after a dismal overnight session on Wall Street amid fears of an upcoming economic slowdown and lingering worries about trade tensions due to mounting skepticism over the U.S.-China tariff truce. Total 24 issues of TSE33 issues declined, with shares in Oil & Coal Products, Insurance, Securities & Commodities Futures, Banks, Machinery, and Glass & Ceramics Productsissues being notable losers. In late afternoon trades, the 225-issue Nikkei index dropped 173.39 points, or 0.8%, at 2,862.66. The broader Topix index of all First Section issues on the Tokyo Stock Exchange declined 11.42 points, or 0.7%, to 1,637.78.

Risk aversion selloff triggered amid growing uncertainty about whether a truce struck between Chinese President Xi Jinping and US President Donald Trump at the G20 summit will lead to a long-term deal to ease trade tensions between the two superpowers.

Following the meeting between Trump and Xi in Argentina, there has been growing confusion about what exactly the leaders agreed to and whether a 90-day deadline for a resolution began immediately or in January. Trump has threatened to impose tariffs worth a further $200 billion on Chinese imports unless China makes it easier for US companies to do business there. White House officials have also struggled to explain whether China had actually agreed to drop a 40% tariff on US cars as part of the deal.

The world's two largest economies seem to be providing conflicting versions of outcomes from last weekend's G20 Summit. The Washington Post suggested that China has not acknowledged a 90-day deadline for reaching a trade deal and has not said it would 'immediately' buy significant farm goods from the US. This morning however Reuters reported that China said it would implement specific issues agreed on as quickly as possible.

Shares of exporters were mostly lower as the safe-haven yen strengthened against the U.S. dollar. Advantest dropped 4% and Tokyo Electron fell almost 2%. Mitsubishi Electric was lower by 2%, while Panasonic and Canon fell more than 1% each and Sony was down almost 1%. Honda was lower by almost 3% and Toyota was down almost 1%.

ECONOMIC NEWS: The latest survey from Nikkei showed that the services sector in Japan continued to expand in November, albeit at a fractionally slower pace with a PMI score of 52.3. That's down from 52.4 in October, although it remains well above the boom-or-bust line of 50 that separates expansion from contraction. Also, the composite index eased to 52.4 in November from 52.5 in October.

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