Japan Nikkei tumble 2% amid Turkey worries, stronger yen

Headline equities of the Japan share market closed lower on Monday, 13 August 2018, as risk aversion selloff triggered amid rising global trade jitters and tensions between Turkey and the US. Meanwhile, yen appreciation against greenback intensified selloff. All TSE33 issues declined, with shares of Machinery, Marine Transportation, Nonferrous Metals, Electric Appliances, Rubber Products, Chemicals and Oil & Coal Products issues being notable losers. At the close, the benchmark Nikkei 225 index dropped 1.98%, or 440.65 points, to 21,857.43. The broader Topix index of all First Section issues on the Tokyo Stock Exchange fell 2.13%, or 36.66 points, to 1,683.50.

Globally markets were fragile as a result of heightened tensions between Turkey and the US. Turkey's currency has fallen more than 40% against the greenback this year on worries over President Tayyip Erdogan's increasing control over the economy and a deepening diplomatic rift with the United States.

The Turkish lira retraced to a new record low in Asia's Monday trade following a recent geopolitics-triggered free fall in the currency. On Monday, the lira dropped to a fresh all-time low of 7.24 against the greenback, before paring some losses after moves were taken to assuage market nerves frayed by the currency's recent weakness. The retracement in losses came after the Turkish central bank moved to improve liquidity during Asia afternoon trade. Among the moves announced Monday was a slashing of lira required reserves held by banks by 250 basis points for all maturities. Before that, Finance Minister Berat Albayrak had said in a Sunday interview with local media outlet Hurriyet that the government had a plan in place following the fall in the lira. The lira's plunge is reminding investors of past crises in emerging markets and rattling nerves worldwide. Money is moving into safe-haven assets like Treasuries and the Japanese yen, though as rates rise in the U.S. the appetite for gold remains subdued, and bullion slipped again.

Shares of export-related companies declined, with automakers and electric appliances taking a hit, due to yen appreciation against greenback and intensifying global trade tension. Mitsubishi Electric, Panasonic, Sony, Canon, Honda, Toyota, and Mazda declined in a range of 2-5%. Construction machinery stock Komatsu slid 4% and Hitachi Construction Machinery declined 4.2%.

Commodity stocks were hard hit. Nippon Steel & Sumitomo Metal Corp fell 2.5%. Shippers Mitsui OSK Lines lost 3.4% and Kawasaki Kisen tanked 5.2%.

Banking stocks also lost ground. Mitsubishi UFJ Financial Group dropped 2.8% and Sumitomo Mitsui Financial Group 2.1%.

CURRENCY NEWS: The Japanese yen appreciated to lower 1110yen zone against U.S. dollar on Monday, as investors bid up safe haven yen resumed on worries about the exposure of European banks to Turkey. The dollar fell 0.7% against the yen to 110.15 yen , the lowest level in six weeks.

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