May 7, 2019 / 2:41 AM / 14 days ago

Nikkei falls as traders return to spike in U.S.-China trade tensions

* Nikkei falls to lowest since early April at one point

* Apple suppliers tank on double whammy of earnings and China demand concerns

* Sony soars after it forecasts better-than-expected profit

By Ayai Tomisawa

TOKYO, May 7 (Reuters) - Japan’s Nikkei fell on Tuesday as investors returned from a 10-day holiday to worries that U.S.-China trade talks may be at risk of breaking down.

Apple Inc’s suppliers and factory automation machinery firms also succumbed to heavy selling.

The Nikkei share average dropped 1 percent to 22,026.32 points by mid-morning, after falling to as low as 21,965.60 earlier, the lowest level since mid-April.

Japanese markets were closed April 27 to May 6 for the Golden Week holidays.

Late on Sunday, U.S. President Donald Trump stunned financial markets by announcing he would hike tariffs on Chinese goods on Friday, triggering a global sell-off in stocks and other riskier assets which had been largely pricing in a trade deal.

“Anything could have happened during the long holiday but the market had not priced in a potential breakdown of the U.S.-China trade talks,” said Makoto Kikuchi, chief executive of Myojo Asset Management. “That’s a totally unexpected scenario.”

U.S. Trade Representative Robert Lighthizer also said the Trump administration would “probably” publish a notice on Tuesday about plans to raise tariffs on $200 billion worth of Chinese goods to 25 percent from 10 percent.

Companies with high exposure to China such as construction equipment makers and factory automation machinery firms underperformed. Komatsu Ltd tumbled 9.1 percent, Yaskawa Electric dropped 4.5 percent and Fanuc Corp shed 2.3 percent.

Apple suppliers also tanked as a double-whammy of concerns about earnings and fears about a fall in China’s demand weighed.

Taiyo Yuden nosedived 16 percent, while Foster Electric tumbled 11 percent after it expected an 11.1 percent drop in its operating profit for the fiscal year ending March 2020.

Murata Manufacturing dived as much as 15 percent after it expected a 17.5 percent drop in its operating profit for this fiscal year and Alps Alpine fell 11 percent after it forecast a 22.1 percent fall in its operating profit for the first half of this fiscal year.

On the other hand, Softbank Group Corp rose as much as 4 percent before it trimmed its gains to be up 0.7 percent after a source said on Friday that the company is considering an initial public offering of its $100 billion Vision Fund.

Sony Corp soared 6 percent after the company expected to post an operating profit of 810 billion yen ($7.32 billion) for this fiscal year through March. It would be a 9.4 percent fall on the year but above the market consensus of 700-750 billion yen, according to SMBC Nikko Securities.

The broader Topix dropped 0.5 percent to 1,609.55. ($1 = 110.6900 yen) (Editing by Kim Coghill)

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