October 9, 2018 / 7:26 AM / 2 months ago

Nikkei hits 3-week low on worries about China, rising U.S. yields

* Global risk aversion puts yen in demand, hurts Japanese stocks

* Tech shares, China-related stocks fall

* Strong yen dents Japanese exporters

By Ayai Tomisawa

TOKYO, Oct 9 (Reuters) - Japan’s Nikkei fell to a three-week low on Tuesday after shares of firms with big exposure to China languished on worries about its economy while chip equipment makers tumbled, tracking weakness in U.S. tech firms overnight.

The Nikkei share average ended 1.3 percent lower to 23,469.39, the weakest closing level since Sept. 18.

Markets in Japan were closed for a holiday on Monday, when Chinese stocks tumbled and the yuan weakened on growing fears the economic impact of the Sino-U.S. trade war will deepen.

Analysts also said rising U.S. yields, which would reduce the allure of stocks, triggering a sell-off in Japanese futures. In Asian trade, U.S. 10-year Treasury yields hit a fresh seven-year high of 3.252 percent.

“There is a concern in the market now which was not seen when the 10-year U.S. Treasury yield was trading around 2.8 percent,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities, adding that when U.S. yields keep rising, stocks with high valuations come under pressure.

“The market got caught off-guard by that.”

Exporters were sold after the safe-haven yen extended gains against the dollar to a fourth straight session, reaching 113.25 in Asian trade. Last week, it hit a nearly 11-month low of 114.54 yen per dollar.

Toyota Motor and Honda Motor both dropped 3.1 percent.

Construction machinery makers as well as electronics component manufacturers, which are exposed to the Chinese market, were sold off. Hitachi Construction Machinery slid 2.0 percent, industrial robot maker Fanuc 2.5 percent and Murata Manufacturing Co 2.2 percent.

The Philadelphia SE Semiconductor Index fell 1.1 percent overnight, hurting Japanese chip-related stocks. Tokyo Electron tumbled 4.5 percent, Screen Holdings stumbled 5.6 percent and Advantest Corp 4.4 percent.

The broader Topix dropped 1.8 percent to 1,761.12. (Editing by Richard Borsuk & Shri Navaratnam)

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