Japan Nikkei falls 0.31% on weak offshore lead, trade tensions

Headline shares of the Japan share market were mixed on Wednesday, 04 July 2018, as the market mood was dented following Wall Street's overnight retreat and as investors continued to assess the impact of trade tensions on the outlook for global growth. Meanwhile, gains in the yen also weighed on Japanese shares. Among TSE33 issues, 17 issues gained, while 16 issues declined. Shares of Mining, Oil & Coal Products, Electric Power & Gas, Warehousing & Harbor Transportation Services, Construction, and Information & Communication issues were notable gainers, while Electric Appliances, Machinery, Precision Instruments, and Securities & Commodities Futures issues being notable losers. At the close, the benchmark Nikkei 225 index dropped 0.31%, or 68.50 points, to 21,717.04. The broader Topix index of all First Section issues on the Tokyo Stock Exchange, meanwhile, edged up 0.03%, or 0.45 points, to 1,693.25.

High-tech stocks tracked Wall Street peers and fell. Tokyo Electron dropped 4.44%, Advantest Corp shed 4.29%, SUMCO Corp fell 4.74% and Screen Holdings lost 4.18%. Panasonic Corp dropped 2% after Tesla Inc tumbled overnight on the back of scepticism over its Model 3 vehicles. Panasonic supplies Tesla with automotive batteries.

 

Fast Retailing retreated 2.15% after same-store sales at its Uniqlo clothing outlets in Japan fell 4% in June from a year earlier, with a cold, wet spell reducing demand for summer outfits.

ECONOMIC NEWS: Japan services sector advanced with a PMI score of 51.4 in June, the latest survey from Nikkei showed on Wednesday. That's up from 51.0 in May, and it moves further above the boom-or-bust line of 50 that separates expansion from contraction. Individually, output was encouraged by faster growth in new business, but employment advanced at a slower pace. Also, Nikkei's composite index climbed to a reading of 52.1 in June from 51.7 in May.

CURRENCY NEWS: The Japanese yen has ticked higher against greenback on Wednesday amid trade tensions. Trade tensions remain at high levels, and although Japan has not been on the receiving end of U.S tariffs, a global trade war could be devastating for the Japanese economy, which is heavily dependent on its export sector. Investors are awaiting the release of the Federal Reserve's June meeting minutes on Thursday and Friday's US jobs data for validation of policymakers' forecasts for two more rate hikes this year.

OFFSHORE MARKET: U.S. stocks closed down in abbreviated trading on Tuesday, 03 July 2018, prior to the US July 4 holiday, with losses in the technology and financial sectors outweighed advances in energy, telecoms and real-estate shares. The Dow Jones Industrial Average fell 112 points, or 0.5%, to close at 24,194. The S&P 500 dropped 12 points, or 0.5%, to end at 2,714 while the Nasdaq Composite Index shed 65 points, or 0.9%, to close at 7,502. The US market is closed on Wednesday for Independence Day holiday.

European share markets rose on Tuesday after German Chancellor Angela Merkel agreed a deal with her Bavarian conservative coalition partners. The STOXX600 index rose by 0.8%, the German Dax rose by 0.9% and the UK FTSE index rose 0.6%.

COMMODITY NEWS: Global oil prices rose on Wednesday, after Libya declared a force majeure on some of its crude exports. Traders also debated whether production would restart at Syncrude's 360,000 barrel a day oil sands facility in Canada after it was hit by a power outage. U.S. light crude futures traded up 0.6% at $74.62 per barrel, after rising above $75 for the first time in more than three years on Tuesday.International benchmark Brent futures stood flat at $77.77.

Base metal prices were mostly lower on the London Metal Exchange (LME) on Tuesday with aluminium and zinc (-1.2%) leading the declines. Copper (-0.6%) fell to 9-month lows on concerns over trade tensions and the spillover to global growth.

The gold futures price rose by US$11.80 an ounce or 1.0% to $1,253.50 an ounce. The spot goldprice was trading near US$1,253 an ounce in late US trade. Iron orefell by 5 cents or 0.1% to US$63.75 a tonne.

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