January 17, 2019 / 6:29 AM / 6 months ago

Japan's Nikkei dips on investor caution, Topix buoyed by BOJ talk

* Nikkei down 0.2 pct, Topix gains 0.35 pct

* Speculation of BOJ’s ETF buying seen supporting Topix

* Financial firms lifted by rise in U.S. peers

* Automakers sag amid wariness over U.S. tariffs

By Shinichi Saoshiro

TOKYO, Jan 17 (Reuters) - Japan’s Nikkei dipped on Thursday, reversing earlier gains, as investors remained wary about the outlook for riskier assets amid lingering worries about the global economy and trade war tensions.

The Nikkei share average closed down 0.2 percent at 20,402.27. Lifted by an overnight bounce on Wall Street, the index initially rose as much as 0.7 percent to 20,571.75, just shy of a four-week peak brushed midweek.

The Nikkei has recovered roughly 8 percent from an eight-month low at the end of December, when massive risk aversion in global markets took a toll.

While a comeback this month in U.S. equities has helped Japanese stocks regain some footing, analysts said there are few incentives for it to push much higher.

“The Nikkei is now back in the premises of the 20,500 threshold, and this appears to have invited selling from participants looking to cut some of their losses suffered during the slide in December,” said Takashi Hiroki, chief strategist at Monex Securities.

“Sentiment that was bruised last month will likely require a few more factors to recover fully, such as better Chinese economic data, easing of U.S.-China trade tensions and a further weakening in the yen.”

The broader Topix, on the other hand, managed to retain its gains to end the day up 0.35 percent at 1,543.20.

Traders said the Topix rose amid speculation that at next week’s policy meeting the Bank of Japan could consider changing the composition of its exchange-traded fund (ETF) purchases with heavier emphasis on Topix relative to the Nikkei.

With Topix-linked ETFs, the BOJ can buy a wider range of stocks than for Nikkei-linked ETFs as the Topix index encompasses broader types of corporate shares.

Wall Street’s major indexes hit one-month highs on Wednesday as strong earnings from Bank of America Corp and Goldman Sachs Group Inc boosted investor sentiment.

Banks and other financial firms tracked the rise of their U.S. counterparts.

Sumitomo Mitsui Financial Group rose 0.9 percent, Mitsubishi UJF Financial Group gained 0.8 percent and Shinsei Bank added 1 percent.

Nomura Holdings rose 4 percent and Daiwa Securities Group climbed 1.2 percent.

The Tokyo Stock Exchange’s (TSE) banking and securities sub sectors gained 0.8 percent and 2.8 percent, respectively.

The iron and steel sub sector on the TSE was up 1 percent, supported by recent gains in iron ore prices.

Kobe Steel advanced 2 percent and Nippon Steel and Sumitomo Mining added 1.2 percent.

Automakers sagged after a Republican senator told reporters that U.S. President Donald Trump is “inclined” to move ahead with tariffs on imported vehicles.

Toyota Motor Corp declined 0.8 percent and Honda Motor Co dipped 0.1 percent, while Nissan Motor Co ended with a modest gain of 0.1 percent.

Trans Genic Inc climbed 5.9 percent after the biotechnology company was granted a patent for a type of genetically-modified mouse used in developing treatment for illnesses caused by inflammation. (Additional reporting by the Tokyo markets team Editing by Jacqueline Wong)

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