Japan Nikkei falls on profit booking

Headline indices of the Japan share market declined for the first time in last four sessions on Thursday, 10 January 2019, as investors opted to lock in profits after the market's recent run of gains amid fears over the US government shutdown, with the yen's rise against the U.S. dollar further spurring profit-taking. Total 26 out of 33 subindexes of the Tokyo Stock Exchange's were in negative territory, with shares in Oil & Coal Products, Chemicals, Precision Instruments, Retail Trade, Electric Appliances, and Pharmaceutical issues being notable losers. At closing bell, the 225-issue Nikkei index dropped 263.26 points, or 1.3%, at 20,163.80. The broader Topix index of all First Section issues on the Tokyo Stock Exchange fell 13.10 points, or 0.9%, to 1,522.01.

The impacts of a federal government shutdown continue to spread across the United States as it enters its 19th day. The fight is over more than $5bn that US President Donald Trump wants for building a border wall. Democrats say they simply will not give him the money, calling it unnecessary. Trump defended his position and the shutdown decision in a speech on Tuesday. Meanwhile, hundreds of thousands of federal workers will not get a cheque next payday.

The meetings this week which are the first ever face-to-face talks since U.S. President Donald Trump and his Chinese counterpart Xi Jinping agreed to a 90-day truce have rejuvenated risk appetite, easing fears of an all-out trade war and its possible impact on global growth. Earlier, U.S. and Chinese officials said progress had been made during the three days of talks in Beijing. While major hurdles remain, the talks appeared to clear a path for higher-level negotiations that could further ease trade tensions before President Donald Trump's March deadline, when he said he will raise tariffs on more than $200 billion in Chinese-made good from 10% to 25%.

The Chinese Ministry of Commerce (MOFCOM) said in a statement on Thursday morning that the two sides had "broad, in-depth and detailed" exchanges on trade and structural issues of shared concern. The talks have strengthened mutual understanding and laid the foundation for addressing both sides' concerns, adding that the two countries also agreed to keep close contact. The MOFCOM's brief statement followed one from the Office of the US Trade Representative (USTR), which also listed several issues discussed at the trade talks, the first face-to-face meeting after the leaders of the two countries reached a truce in December. The USTR said in its statement that the trade talks discussed ways to achieve fairness, reciprocity and balance in trade relations and the need for any agreement to have a verification process. The discussions also focused on China's pledge to buy "a substantial amount of agricultural, energy and other products from the US," it said."The delegation will now report back to receive guidance on the next steps," the USTR said, echoing China's statement on keeping close contact. The MOFCOM's statement was more concise and did not mention specific topics compared to the USTR one, which listed specific topics, most of which have been the country's long-held grievances against China.

The cost of producing goods in China's factories slowed sharply in December, a sign demand remains weak as the US trade war drags on, while consumer inflation also flagged, official data showed Thursday. The producer price index (PPI) -- an important barometer of the industrial sector that measures the cost of goods at the factory gate -- rose 0.9% on-year in December, compared with a 2.7% rise the previous month. The reading marks the lowest growth since September 2016, and fell short of market expectation. A slowdown in factory gate inflation reflects sluggish demand, while a turn to deflation could dent corporate profits. The consumer price index (CPI) -- a key measure of retail inflation -- rose 1.9%, compared with 2.2% in November. Rapidly falling inflation, especially factory-gate PPI inflation, is further evidence that China's economy is slowing at a worrying pace. Slumping PPI inflation suggests corporate earnings will almost surely continue to fall in coming months. The weak figures come as China's trade war with the US starts to bite and economic growth slows, with data last week showing manufacturing sector contracted in December for the first time in more than two years.

Exporters lost ground, with Sony Corp shedding 3%, TDK Corp falling 2.7% and Daikin Industries sliding 2.3%.

CURRENCY NEWS: The Japanese yen, which can be a haven during market uncertainty, appreciated in the lower 108 yen zone against dollar on Thursday. The dollar was quoted at 108.18-19 yen compared with 108.10-20 yen in New York and 108.91-92 yen on Wednesday in Tokyo. The euro, meanwhile, fetched 125.00-125.04 yen against 124.73-83 yen in New York and 124.87-91 yen in late Wednesday afternoon trade in Tokyo.

On Wall Street, stocks rose for the fourth consecutive session on Wednesday after the trade talks were extended to a third day. Traders took this as a positive sign, but a partial government shutdown at home that appeared far from being resolved limited gains. The S&P 500 index added 0.4% to 2,584.96. The Dow Jones Industrial Average climbed 0.4% to 23,879.12 and the Nasdaq composite was 0.9% higher at 6,957.08.

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