Japan: Nikkei falls 0.78% amid US-China trade-war frictions

Headline shares of the Japan share market ended lower on Thursday, 05 July 2018, as investors risk aversion selloff triggered amid jitters a day before Washington's proposed tariffs on Chinese imports. Meanwhile, marginal yen appreciation against greenback fuelled selloff. All TSE33 issues declined, with shares of Oil & Coal Products, Nonferrous Metals, Retail Trade, Rubber Products, Electric Appliances, Securities & Commodities Futures, Banks, Iron & Steel, and Marine Transportation issues being notabe losers. At the close, the benchmark Nikkei 225 index dropped 0.78%, or 170.05 points, to 21,546.99. The broader Topix index of all First Section issues on the Tokyo Stock Exchange, meanwhile, declined 1.01%, or 17.05 points, to 1,676.20.

Market participants were concerns over the negative implications of the US trade war with rest of the world. A trade war between the US and the rest of the world may lead to a global financial crisis. The United States is due to impose the tariffs on Chinese exports on July 6. The US also imposed tariffs on cars from Europe. Although Japan has not been on the receiving end of U.S tariffs, a global trade war could be devastating for the Japanese economy, which is heavily dependent on its export sector.

China's customs department informed markets on Thursday that China's retaliatory tariffs on US goods will take effect immediately after US tariffs on Chinese imports kick in. The Trump administration has levied a 25% tariff on $34 billion in Chinese goods, while the Chinese government has retaliated by announcing tariffs on the same value of U.S. goods.

Shares of Sony Corp lost 3.4%, hit by profit-taking among domestic institutional investors amid risk aversion stemming from the U.S.-China trade dispute.

Taiyo Yuden plunged 4% due to brokerage firm lowering of its rating for the company. Morgan Stanley MUFG Securities Co. lowered its investment rating for the electronic parts maker.

By contrast, beer brewer Asahi Group gained ground a day after Goldman Sachs Japan Co. revised up its investment rating and stock target price for the company.

CURRENCY NEWS: The Japanese yen marginally appreciated to mid-110 yen zone against U.S. dollar in Tokyo on Thursday. The dollar was quoted at 110.40-45 yen compared with 110.47-48 yen on Wednesday in Tokyo.

OFFSHORE MARKET: US share markets were closed on Wednesday for the Independence Day holiday. European share markets were mixed on Wednesday. The pan-European STOXX600 index closed flat. But the German Dax and UK FTSE indexes both fell by 0.3%.

COMMODITY NEWS: Crude oil prices rose on Wednesday, driven higher by a decline in US crude inventories and rising Iranian supply risks. US crude inventories fell by 4.5 million to 416.9 million barrels over the week to June 29. And Iranian President Hassan Rouhani hinted that his country may disrupt regional crude oil exports if the US followed-through with sanctions against Iran's oil sales. Brent crude rose by US48 cents or 0.6% to US$78.24 a barrel and the US Nymex (unsettled due to the US public holiday) rose by US19 cents or 0.3% to US$74.33 a barrel.

Base metal prices were mostly lower on the London Metal Exchange (LME) on Wednesday ahead of expected new trade tariffs from the US on Friday. Zinc (-3.2%) fell to near one year lows. Copper (-1.5%) was near 11-month lows. Producer Freeport-McMoran was granted an extension of a temporary operating permit at its Grasberg mine, likely boosting copper supplies. Aluminium rose by 0.9%.

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