May 17, 2017 / 2:53 AM / a year ago

Nikkei stumbles after weak U.S. data, financial stocks underperform

* Trump concerns pressure market mood

* Insurers, banks tumble

* Investors buy utility, food stocks

By Ayai Tomisawa

TOKYO, May 17 (Reuters) - Japanese stocks dropped on Wednesday morning after the dollar eased against the yen on weak U.S. economic data, while financials stocks underperformed hit by lower U.S. yields.

The Nikkei shares average fell 0.5 percent to 19,817.68 in mid-morning trade.

The dollar skidded 0.5 percent to one-week lows against its perceived safe-haven Japanese counterpart and last stood at 112.56 yen.

U.S. housing starts dropped 2.6 percent to a seasonally adjusted annual rate of 1.17 million units, the lowest since November.

The market’s mood was further dampened by weakening confidence over the U.S. president’s ability to push through tax reforms and stimulus programmes investors had been hopeful for since his election in November.

President Donald Trump asked his now-dismissed FBI Director James Comey to end the agency’s investigation into ties between former White House national security adviser Michael Flynn and Russia, according to a source who had seen a memo written by Comey.

“We still can’t say clearly that this Trump’s case is a serious risk to the stock market yet. But people are watching if it leads to more serious problems such as a difficulty for him to push through his tax reforms and fiscal policy,” said Takuya Takahashi, a strategist at Daiwa Securities.

Financial stocks such as insurers and banks - that earn profits from investing in higher-yielding products - tumbled after U.S. Treasury yields fell as low as 2.31 percent overnight.

Dai-ichi Life Holdings stumbled 4.0 percent, Sompo Holdings dropped 1.8 percent, while Mizuho Financial Group languished 2.4 percent.

Domestic-demand-sensitive stocks, such as utility and food shares, gained as investors stayed defensive. Tokyo Gas climbed 2.3 percent, and Ajinomoto and Japan Tobacco both rose 1.3 percent.

The broader Topix shed 0.4 percent to 1,577.34 and the JPX-Nikkei Index 400 declined 0.5 percent to 14,073.42. (Editing by Jacqueline Wong)

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