* Nikkei has fallen 1.4 pct for the week
* Sharp jumps to 2-week high after it cancels share issuance
* Tech shares underperform
By Ayai Tomisawa
TOKYO, June 29 (Reuters) - Japanese stocks dropped on Friday morning as simmering worries over a trade fight between the United States and its major trading partners kept investors on tenterhooks, while Sharp jumped after it cancelled plans to issue new shares.
Technology stocks underperformed, with chip equipment makers Screen Holdings tumbling 7.5 percent and Tokyo Electron falling 1.2 percent. Silicon products maker Shin-Etsu Chemical shed 1.4 percent.
The Nikkei 225 share average fell 0.3 percent to 22,205.60 in midmorning trade, hovering near its 75-day moving average of 22,180.17. The benchmark index has fallen 1.4 percent for the week so far.
U.S. President Donald Trump has rattled the world trade order by seeking to renegotiate the terms of some of the United States’ trading relationships, in particular with China.
The U.S. Trade Representative’s (USTR) office revised its China tariff list, targeting $34 billion of goods for tariffs to take effect on July 6, deleting flat panel television sets, air conditioning parts and some aluminum alloys.
“The recent pattern shows that when Trump sets a high bar for its trade partners, they end up finding a middle ground which calms the market,” said Tetsuro Ii, president of Commons Asset Management.
“Trump does set a high bar but he worries about the repercussion on his economy at the same time,” Ii said, referring to Harley-Davidson Inc’s decision this week to move production of motorcycles shipped to the European Union from the United States to its international facilities.
“The stock market may face this tug-of-war for a while.”
Sharp Corp was in the spotlight, jumping 18 percent to a two-week high and was the biggest percentage gainer on the board as dilution fears faded after it cancelled plans to issue up to $2 billion in new shares due to trade fears-driven market volatility.
The company first announced the plan on June 5, saying it would use the funds mostly to buy back preferred shares that were issued to banks in a return for a financial bailout in 2015. Sharp stock fell 21 percent since the announcement.
“Since the company had announced such a large share issuance, the market was relieved to learn the cancellation news,” said Yoshihiro Okumura, general manager at Chibagin Asset Management.
“Generally speaking, company management is expected to take a cautious stance on fund raising and new investment amid uncertainty over global economic growth, but investors also wonder whether market volatility is the big enough reason to cancel an already announced fund raising plan.”
The broader Topix dropped 0.4 percent to 1,720.40. (Editing by Shri Navaratnam)