July 3, 2018 / 3:07 AM / 10 months ago

Nikkei erases gains, hits near 3-month lows on trade war anxiety

TOKYO, July 3 (Reuters) - Japanese shares snapped back into the red from a modest bounce early on Tuesday, briefly touching near three-month lows on growing worries a trade row between the United States and China could harm the economy and corporate earnings.

Nikkei average ended the morning trade almost flat at 21,805.73, having dropped 0.4 percent at one point to 21,722.23, its lowest level since mid-April.

The market erased earlier gains after Hong Kong shares tumbled more than 3 percent ahead of a July 6 deadline, when the Washington is set to impose tariffs on $34 billion worth of Chinese exports to the United States.

“It is difficult at this stage to estimate the spill-over effects of the tariffs,” said Keita Kubota, senior investment manager at Aberdeen Standard Investments. “But for a long-term investor like us, the current market volatilities should also provide good buying opportunities,” he said.

Non-ferrous metal companies and shippers , among the worst hit after U.S. President Donald Trump announced tariffs on steel and aluminuim products, fell 1.6 and 0.9 percent respectively, leading the losses.

Although U.S. manufacturing data published on Monday underscored the current strength of the world’s no. 1 economy, investors are worried the simmering U.S.-driven international trade disputes could derail global growth.

On Monday U.S. President Donald Trump warned the World Trade Organization that “we’ll be doing something” if the United States is not treated properly, just hours after the European Union said that U.S. automotive tariffs would hurt its own vehicle industry and prompt retaliation

Some technology shares with solid earnings outlook were a bright spot, as traders took their cue from rise in U.S. high-tech shares on Monday.

Nintendo rose 1.9 percent while Keyence climbed 1.9 percent. Murata Manufacturing gained 1.5 percent

The broader Topix ended the morning 0.09 percent higher at 1,696.88, with advancers outnumbering decliners by 1,160 to 778. (Editing by Shri Navaratnam)

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