Japan Nikkei falls as US, China trade war gets bitter

The Japan share market declined on first trading day of new month, Monday, 02 September 2019, as aversion selloff triggered on concerns over the outlook for the global economy after the United States and China went ahead with their additional tariff increases on each other's goods on Sunday, 01 September 2019, despite multiple indications last month of a possible breakthrough in trade negotiations. Selloff pressure fuelled further after official data showed Japanese manufacturing activity declined for a fourth straight month in August amid flagging demand. Around late afternoon, the 225-issue Nikkei Stock Average declined 63.70 points, or 0.31%, to 20,640.67, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange dropped 5.42 points, or 0.36%, at 1,506.44.

Total 29 sectors out of 33 of the sectors of Topix index declined, with Land Transportation, Fishery, Agriculture & Forestry, Mining, Warehousing & Harbor Transportation Services, Services, and Foods issues being notable losers, while Marine Transportation, Nonferrous Metals, and Insurance issues were notable gainers.

The United States and China went ahead with their additional tariff increases on each other's goods on Sunday, 01 September 2019, despite multiple indications last month of a possible breakthrough in trade negotiations.

The 15% US duty apply to about $112 billion of consumer goods ranging from footwear and apparel to home textiles and certain technology products like the Apple Watch. A separate batch of about $160 billion in Chinese goods including laptops and cellphones will be hit with 15% tariffs on 15 December 2019. The Trump administration has also announced that existing 25 percent tariffs on a separate group of $250 billion of Chinese imports will increase to 30 percent on 1 October 2019.

China's retaliation also took effect on Sunday, with higher tariffs being rolled out in stages on a total of about $75 billion of US goods. Higher Chinese duties that took effect 1 September include an extra 10% on American pork, beef, and chicken, and various other agricultural goods, while soybeans will get hit with an extra 5% tariff on top of the existing 25%. Starting in mid-December, American wheat, sorghum, and cotton will also get a further 10% tariff. While China imposed a new 5% levy on US crude oil starting from September, there was no new tariff on liquefied natural gas. The resumption of a suspended extra 25% duty on US cars will resume 15 December 2019, with another 10% on top for some vehicles. With existing general duties on autos taken into account, the total tariff charged on US-made cars would be as high as 50%.

China-linked shares were lower, with construction machinery maker Komatsu trading down 0.5% and industrial robot maker Fanuc down 0.6%, and electrical equipment maker Yaskawa Electric Corp fell 1%.

Shares of shipping companies gained on the back of rise in the Baltic index, which tracks rates for ships ferrying dry bulk commodities, to a nine-year peak. Nippon Yusen KK edged up 0.5%, Kawasaki Kisen Kaisha added 1.2% and Mitsui OSK Lines was up 0.8%.

ECONOMIC NEWS: The final Jibun Bank Japan Manufacturing Purchasing Managers' Index (PMI) edged down to a seasonally adjusted 49.3 from 49.4 in July, and also off a preliminary 49.5. The index stayed below the 50.0 threshold that separates contraction for a fourth month, marking the longest run of shrinkage since a six-month stretch from March to August 2016.

CURRENCY NEWS: The U.S. dollar was little changed in the mid 106 yen zone in Tokyo on Monday. The dollar was stood at 106.19 yen in Asian trade from 106.26 yen in New York late Friday.

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