June 21, 2019 / 6:21 AM / a year ago

Nikkei drops as investors turn focus to upcoming Trump-Xi meeting

* Nikkei rises 0.7% this week, third straight weekly gains

* Nissan rises after co says to grant Renault seats on key committees

By Ayai Tomisawa

TOKYO, June 21 (Reuters) - Japan’s Nikkei dropped on Friday as investors awaited cues from U.S.-China trade talks, while oil and mining shares were in demand amid rising geopolitical risks in the Middle East.

The Nikkei share average fell 1% to 21,258.64. The index rose 0.7% for the week and posted a third week of gains thanks to hopes that the U.S. central bank will cut interest rates as early as next month.

Investors’ focus has now shifted to a meeting between U.S. President Donald Trump and China’s President Xi Jinping during a Group of 20 summit in Japan next week, with hopes that they can put negotiations back on track to de-escalate a trade war.

Trump said that he would decide whether to carry out his threat to hit Beijing with tariffs on at least $300 billion in Chinese goods after the meeting.

“If Trump decides not to carry out the threat, the market will likely rise,” said Hiroyuki Ueno, a senior strategist at Sumitomo Mitsui Trust Asset Management.

Meanwhile, tensions between the United States and Iran heightened after Iran shot down a U.S. military drone aircraft in the Gulf region.

The resulting jump in oil prices spurred buying in mining and oil shares. Inpex Corp and Japan Petroleum Exploration Co jumped 4.4% and 3.7%, respectively while Idemitsu Kosan soared 2.4%.

Financial shares lost ground after U.S. yields fell on the likelihood of an interest rate cut as early as next month following the Fed’s policy meeting earlier this week.

Mitsubishi UFJ Financial Group dropped 0.7% and MS& AD Insurance dropped 1.2%.

Nissan Motor Co bucked the weakness, rising as much as 1.4% before ending up 0.6% after it said on Friday it would grant alliance member Renault’s representatives seats on key committees of its board, ending a dispute between the two automakers.

The broader Topix dropped 0.9% to 1,545.90. Declining issues outnumbered advancing ones 1,458 to 619. (Editing by Simon Cameron-Moore)

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