Japan Market extends losses as trade war jitters continue

Japan share market closed down for second straight session on Wednesday, 08 May 2019, hit by risk aversion selloff on tracking losses on global markets overnight as financial markets grappled with the risk of an all-out trade war between China and the United States. All 33 subsectors of the Tokyo Stock Exchange declined, with shares in Precision Instruments, Air Transportation, Chemicals, Nonferrous Metals, Glass & Ceramics Products, and Metal Products issues being notable losers At closing bell, the 225-issue Nikkei Stock Average declined 1.46%, or 321.13 points, to end at 21,602.59, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange was off 1.72%, or 27.51 points, at 1,572.33.

In the US, the Dow, S&P 500, and Nasdaq all finished the day solidly in the red, adding to their losses from Monday. The Dow fell about 473 points, marking the second-worst trading day of the year. The S&P 500 was down 1.7% and the Nasdaq fell 2%. European stocks fared poorly too. The FTSE 100, DAX, and CAC 40 all closed 1.6% lower. The pan-European Stoxx 600 fell 1.4%.

 

Wednesday's slide comes on the eve of trade talks in Washington between China and the United States, which have been clouded by the Trump administration's renewed threat to increase tariffs on Chinese goods.

Global stocks were ailing after President Donald Trump Sunday threatened further tariffs on Chinese imports that could come into effect on Friday, throwing global markets into disarray. His administration doubled down on that threat Monday evening. Investors previously expected Beijing and Washington to be close to sorting out a trade deal after months of negotiations. A lack of an agreement between the world's two largest economies could stymie global growth. Technology and industrial companies have been hit the hardest by the selloff, because their businesses inherently rely on the global trade of materials and finished goods.

China isn't the only place with which Trump wants to change trade relations. The United States has other trade-related issues on its plate: The European auto industry is also on his list and could get hit with tariffs. The US-driven replacement for NAFTA, called USMCA, took more than a year to negotiate but is not yet ratified. In short, uncertainty is back.

Speaking to reporters on Monday, US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin said China reneged on previous agreements over the weekend, undermining progress towards a detailed trade agreement between the world's two largest economies. Lighthizer, the top US trade negotiator, said the administration would increase penalties on $200 billion of Chinese goods to 25% from 10% on Friday. Trump renewed his threat to raise tariffs on Sunday.

CURRENCY NEWS: The Japanese yen continued appreciation against the dollar on Wednesday, as nervous investors seek safe-haven assets on renewed worries over US-China trade war and global economic uncertainties after US President Donald Trump dramatically increased pressure on China to reach a trade deal by announcing he will hike tariffs on $200 billion worth of Chinese goods this week and target hundreds of billions more soon. The US dollar traded at 110.73 yen in Asian trade, down slightly from 110.87 yen in New York on Monday but lower than 111.67 yen in Tokyo before 10 days of holidays.

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