Nikkei dragged down by Wall Street sell-off, Japan Q3 GDP contraction

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Updated: December 10, 2018 9:06:57 AM

Japan's Nikkei fell on Monday, tracking a sharp sell-off on Wall Street on renewed Sino-U.S. trade tensions and a deeper-than-expected contraction in the Japanese economy in the third quarter.

Nikkei dragged down by Wall Street sell-off, Japan Q3 GDP contraction

Japan’s Nikkei fell on Monday, tracking a sharp sell-off on Wall Street on renewed Sino-U.S. trade tensions and a deeper-than-expected contraction in the Japanese economy in the third quarter.

The Nikkei share average shed 2.25 percent to 21,191.23, ending the morning session close to its lowest level since Oct. 30.

Japan’s benchmark index has fallen 13.3 percent from a 27-year high hit in early October.

U.S. equity futures and Asian shares slipped on Monday on worries over slowing growth and fears of fresh trade tensions between Washington and Beijing.

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Japanese gross domestic product shrank at a below-forecast annualised rate of 2.5 percent in July-September, deeper than an initial estimate of a 1.2 percent contraction, revised data showed on Monday.

“It suggests that companies are cooling on their capital expenditure plans. That’s putting selling pressure on machinery stocks,” said Eiji Kinouchi, chief technical analyst at Daiwa Securities.

Investors are also concerned a fresh flare-up in Sino-U.S. tensions could crush any chances of a trade deal between Washington and Beijing.

Factory automation equipment makers Fanuc Corp dropped 2.8 percent, Nabtesco Corp lost 3.0 percent and Keyence gave up 3.1 percent.

Selling extended to shares of personal care goods makers that have seen strong demand from Chinese consumers.

Such stocks are more defensive than semi-conductor and machinery firms, Kinouchi said. “If you look at what stocks have sold off before, it shows that sentiment has become worse,” he added.

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Cosmetics maker Shiseido Co dropped 2.4 percent and Kao Corp was off 3.6 percent.

Index-heavyweights Fast Retailing and SoftBank Corp gave up 2.1 percent and 3.0 percent, respectively, while Nintendo was flat.

Audio equipment maker Pioneer Corp plummeted 28.4 percent as it started trading after news on Friday that the company will be bought by buyout firm Baring Private Equity and be delisted.

Japan Display lost 10.6 percent after the Nikkei business daily reported that the company is cutting production of smartphone liquid crystal displays in December.

The broader Topix lost 2.01 percent to 1,587.87, with all but two subsectors trading in negative territory

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