Japan Nikkei falls on global growth, trade woes

Headline indices of the Japan share market closed lower on Wednesday, 10 April 2019, as risk sentiments hurt by following soft lead from Wall Street overnight after the International Monetary Fund cut its global growth forecasts and as tensions over tariffs between the United States and Europe escalated after U.S. President Donald Trump said taxes on imports from the European Union could be expanded. Every 33 subsectors of the Tokyo Stock Exchange declined, with shares in Oil & Coal Products, Mining, Construction, Other Financial Business, Electric Appliances, and Pulp & Paper issues being notable losers. At closing bell, the 225-issue Nikkei Stock Average declined 115.02 points, or 0.53%, at 21,687.57. The broader Topix index of all First Section issues on the Tokyo Stock Exchange dropped 11.10 points, or 0.69%, at 1,607.66.

Market participants appetite for risk assets were subdued after the IMF cut its forecast for world economic growth this year, saying the global economy is slowing more than expected and that a sharp downturn could require world leaders to coordinate stimulus measures. The world economy will grow 3.3% this year, down from the 3.5% the IMF had forecast for 2019 in January, the fund said Tuesday in its latest World Economic Outlook. The 2019 growth rate would be the weakest since 2009, when the world economy shrank. It's the third time the IMF has downgraded its outlook in six months. The global volume of trade in goods and services will increase 3.4% this year, weaker than the 3.8% gain in 2018 but reduced from the IMF's January estimate of 4%, the fund's report showed.

 

The IMF cut its forecast for U.S. growth to 2.3% this year, down 0.2%age point since the IMF's last global outlook in January. The downgrade reflects the impact of the partial government shutdown that ended in January, as well as lower-than-expected public spending. The IMF slashed its outlook for the euro area to 1.3% this year, down 0.3 point from three months ago. The IMF cut its outlook for U.K. growth to 1.2% this year, down 0.3 point from three months ago. The IMF raised its forecast for Chinese growth by 0.1 point to 6.3% this year, while lowering its projection for growth in Japan by 0.1 point to 1%. The fund cut its outlook for India's growth this year to 7.3%, down from 7.5% in January.

U.S. data overnight added to the cautious mood, with job openings dropping to an 11-month low in February and raising doubts about the strength of U.S. labor market, which has so far been one of the few bright spots in the economy.

Global trade anxiety was another sore point for risk asset markets. U.S. President Donald Trump threatened to impose tariffs on $11 billion worth of European Union products, heightening tensions over a long-running transatlantic aircraft subsidy dispute. The move came as markets remain on edge as negotiators try to hammer out trade deals with China and neighbors Mexico and Canada.

Shares of exporters declined, due to yen appreciation against greenback. A higher yen is negative for Japanese exporters as it makes their products less competitive abroad and erodes their profits when repatriated. Nintendo fell 0.6% to 33,050 yen and Toyota lost 0.6% to 6,791 yen.

Japan Post tumbled 2.6% to 1,252 yen after reporta that the government was planning the sale as early as autumn this year to raise around 1.3 trillion yen. The finance ministry said late Tuesday it was preparing for a third sale of shares in the giant postal group. The move would cut the ministry's stake to the legally mandated minimum of just over one-third from the current 57%, ending a privatisation process that has lasted more than a decade.

ECONOMIC NEWS: Japan Core Machine Orders Up 1.8% On Month In February -- Japan total value of core machine orders was up a seasonally adjusted 1.8% on month in February, the Cabinet Office said on Wednesday, coming in at 836.7 billion yen, following the 5.4% contraction in January. On a yearly basis, core machine orders sank 5.5% following the 2.9% decline in the previous month. Government orders added 2.2% on month but fell 3.7% on year, while orders from overseas surged 19.0% on month but fell 1.0% on year. Orders from agencies tumbled 8.8% on month and 2.4% on year.

Japan Producer Prices Climb 0.3% in March -- Japan producer prices were up 0.3% on month in March, the Bank of Japan said on Wednesday, unchanged from the February reading. On a yearly basis, producer prices climbed 1.3%, up from 0.9% in the previous month. Export prices added 0.8% on month and 0.2% on year, the bank said, while import prices jumped 1.6% on month and 2.5% on year.

CURRENCY NEWS: The Japanese yen, widely viewed as a safe-haven currency, appreciated against the dollar on Wednesday, amid a flare-up in trade tensions between the United States and Europe and spawning worries that the global economy may worsen further. The Japanese yen traded at at 111.13 yen against 111.15 yen in New York Tuesday afternoon.

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