Japan Nikkei falls on caution ahead of US-China trade talks

Headline indices of the Japan share market were tad lower in choppy trade on Monday, 20 August 2018, weighed by yen appreciation against greenback and on caution ahead of two days of trade talks in Washington starting Wednesday between the world's two largest economies. Total 27 issues out of 33 TSE index declined, with shares of Nonferrous Metals, Warehousing & Harbor Transportation Services, Marine Transportation, Metal Products, Wholesale Trade, Electric Power & Gas, Pharmaceutical, and Precision Instruments issues being notable losers. At closing bell, the benchmark Nikkei 225 index declined 0.32%, or 71.38 points, to 22,199. The broader Topix index of all First Section issues on the Tokyo Stock Exchange dropped 0.32%, or 5.38 points, to 1,692.15.

Stocks moved in a narrow range in the afternoon as many market participants are awaiting developments in the US-China trade conflict after the two countries said on Thursday, 16 August 2018, that they would hold lower-level trade talks next week. As per reports, the talks in Washington would take place on August 21 and 22, just before $16 billion in new US tariffs on Chinese goods take effect, along with an equal amount of retaliatory tariffs from Beijing. The US Trade Representative's office said on Friday it doubled the length of tariff hearings on the next $200 billion worth of Chinese goods to six days from the previously planned three due to overwhelming demand from companies to testify. The hearings will be held Aug. 20-24 and on Aug. 27.

Shares on nonferrous metal producers declined as investors feared a possible slowdown in the Chinese economy would decrease demand for nonferrous metal products. Mitsui Mining and Smelting dropped 4.9% to 3,100 yen while Sumitomo Metal Mining lost 2.5% to 3,623 yen.

Shares of major exporters dropped due to stronger yen against basket of major currencies. Shares of Sony, Panasonic, Mitsubishi Electric and Canon were down in a range of 0.5% to 2%. In the auto space, Honda and Toyota were down in a range of 0.2% to 1%.

Shares of energy companies were mostly higher, following strength in crude oil prices on hopes trade talks between US and China could ease pressure on the sector. Inpex was rising 0.6%, while Japan Petroleum was lower by almost 1%

CURRENCY NEWS: The Japanese yen was trading mid 110 yen zone against U.S. dollar on Monday, as US-China trade talks interrupted demand for the safe haven yen. The dollar was quoted at 110.48-49 yen compared with 110.45-55 yen in New York and 110.70-72 yen on Friday in Tokyo. The euro, meanwhile, fetched 126.37-41 yen against 126.45-55 yen in New York and 126.07-11 yen in late Friday afternoon trade in Tokyo.

OFFSHORE MARKET NEWS, US stock market closed higher on Friday, after reports that Chinese and U.S. negotiators are drawing up a road map for talks to try to end their trade impasse. The Dow Jones Industrial Average advanced 110.59 points or 0.4% to 25,669.32, the Nasdaq inched up 9.81 points or 0.1% to 7,816.33 and the S&P 500 rose 9.44 points or 0.3% to 2,850.13.

The major European markets also closed mixed on Friday. The U.K.'s FTSE 100 Index inched up by less than a tenth of a percent, the French CAC 40 Index and the German DAX Index edged down by 0.1% and 0.2%, respectively.

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