Japan Market sinks 1.2%

Headline indices of the Japan share market declined on Wednesday, 29 May 2019, as risk aversion selloff triggered on tracking losses in Europe and on Wall Street overnight amid anxious about a possible economic slowdown and the absence of any progress in resolving trade dispute between the world's top two economic superpowers. Meanwhile, yen appreciation against greenback also dampened sentiments. Total 31 issues of 33 subsectors of the Tokyo Stock Exchange declined, with shares in Electric Power & Gas, Precision Instruments, Foods, Pulp & Paper, and Retail Trade issues being notable losers. At closing bell, the 225-issue Nikkei Stock Average declined 1.2%, or 256.77 points, to 21,003.37, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange was down 0.94%, or 14.58 points, at 1,536.41.

Stalled talks in the U.S.-China trade war have soured sentiment for risk assets, with the global economy already showing signs of fragility before the full impact of the most recent tariff hikes kicks in. Investors remained cautious, awaiting new developments between Beijing and Washington amid the ongoing trade tensions.

 

U.S. President Donald Trump said Monday the U.S. was not ready to strike a deal with China, before adding he expected one in the future. He also said tariffs on Chinese imports could go up substantially.

Beijing is gearing up to use its dominance of rare earths as a counter in its trade battle with Washington, according to in China that included hints from the state planning agency. A report in Chinese state media that suggested Beijing would restrict exports of rare earth, using the minerals as leverage in the trade dispute, also fanned anxiety. Rare earth is a key component in devices ranging from smartphones and cameras to televisions and any move to restrict their supply would have a devastating impact on manufacturers, with China producing more than 95% of the commodities.

Chinese shipments accounted for 80% of all U.S. imports of rare-earth minerals between 2014 and 2017, according to reports, suggesting that U.S. markets could be in for a major blow if the government carries out plans to restrict business to the U.S. President Trump indicated this week that negotiators are no closer to a deal with China's government over a variety of trade issues, while the Treasury Department is reportedly considering $300 billion in further tariffs targeting imports from China. The Trump administration has accused Chinese negotiators of walking back provisions the two sides had previously agreed upon, an accusation that has stalled the bilateral talks.

Shares of export-related companies declined on a stronger yen. Mitsubishi Electric, Canon, Panasonic and Sony Corp were down in a range of 0.4% to 1%. Among tech stocks, Advantest fell more than 3% and Tokyo Electron was lower by more than 2%. In the auto space, Honda dropped almost 1% and Toyota was down 0.5%.

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