Japan Nikkei extends losses on global growth worries

Headline indices of the Japan share market declined on Thursday, 06 December 2018, as risk aversion selloff continued after a dismal overnight session on Wall Street amid concerns about an economic slowdown in the United States and amid confusion over US-China trade progress, and ahead of major events in coming days. Meanwhile selloff intensified after the arrest of the chief financial officer of China tech giant Huawei Technologies Co in Canada and is facing possible extradition to the U.S. for violating sanctions against trading with Iran. All 33 issues of the Topix index declined, with shares in Electric Appliances, Precision Instruments, Pharmaceutical, Machinery, Chemicals, and Glass Securities & Commodities Futures issues being notable losers. In late afternoon trades, the 225-issue Nikkei index declined 462.33 points, or 2.11%, at 21,457. The broader Topix index of all First Section issues on the Tokyo Stock Exchange shed 31.35 points, or 1.9%, to 1,609.14.

Global equity markets have been shaken and the dollar fell this week after an inversion in a part of the U.S. Treasury yield curve triggered market concerns about economic growth. The spread between the two-year and five-year Treasury yields inverted this week and the two-year/10-year spread was at its flattest in more than a decade amid a sharp fall in long-term rates. A flatter curve is seen as an indicator of a slowing economy, with lower longer-dated yields suggesting that the markets see economic weakness ahead.

 

Investors are looking for progress on trade as well as clues to the future path of economic growth. U.S. President Donald Trump said China is sending very strong signals following trade discussions in Argentina, as uncertainty remains over what commitments were made between the two nations. Over the weekend, President Trump agreed to suspend increases in tariffs on Chinese goods for 90 days, after a meeting with Chinese leader Xi at the G-20 summit in Buenos Aires.

The Federal Reserve's Beige Book economic report showed fading optimism over prospects for growth at U.S. firms even as a majority of districts continued to report a modest expansion in recent weeks.

CURRENCY NEWS: The Japanese yen, which can be a haven during market uncertainty, strengthened against dollar, on concerns about growth in the world's largest economy and in the wake of reports that Canada had arrested the chief financial officer of China's Huawei. The arrest reignited concerns over the chances for a longer-term US-China deal on trade.

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