Japan Nikkei rises on possible Mexico tariff delay

The Japan share market inclined on Friday, 07 June 2019, following U.S. shares advancing overnight, as investor sentiment was bolstered by reports that United States was considering delaying a 5% tariff on Mexican goods that is set to go into effect from next week. Sentiment was also buoyed by rhetoric from central bankers, including the European Central Bank's, which was interpreted by some as dovish. However, market gains were capped due to anxious about escalating trade disputes between the United States and key trading partners, primarily China. Around late afternoon, the 225-issue Nikkei Stock Average advanced 0.5%, or 103.02 points, to 20,877.08, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange grew 0.37%, or 5.58 points, at 1,530.49.

Total 22 subsectors out of 33 subsectors of the Topix's were in positive territory, with Oil & Coal Products, Machinery, Electric Appliances, Nonferrous Metals, and Mining issues being notable gainers, whereas Pulp & Paper, Air Transportation, and Electric Power & Gas issues were notable losers

Local market received a boost from gains in the Wall Street overnight after reports that Trump administration is considering delaying a planned 5% tariff on all imports from Mexico, as discussions continue over how to stop the flow of Central American migrants to the U.S. border. The Dow Jones Industrial Average rose 181.10 points, or 0.7%, at 25,720.66. The S&P 500 index rose 17.34 points, or 0.6% to 2,843.49, while the Nasdaq Composite Index added 40.08 points, or 0.5%, to reach 7,615.55.

U.S. and Mexican officials continued trade talks Thursday in a bid to avert import tariffs that Trump has threatened to impose unless Mexico acts to stem the flood of Central American migrants at America's southern border. Lawmakers who have been in talks with both U.S. and Mexican officials said they were hopeful a deal could be reached to satisfy Trump, or at least delay the tariffs.

Sentiment was also buoyed by rhetoric from central bankers, including the European Central Bank's, which was interpreted by some as dovish. The ECB left its overnight deposit interest rate at minus 0.4%, while extending its forecast for how long it will keep rates this low into at least the first half of 2020. The ECB had previously indicated rates would remain on hold through the end of 2019.

However, market topside capped, as investors have been anxious about escalating trade disputes between the United States and key trading partners, primarily China. The trade disputes with Mexico and China threaten to stifle economic growth in the U.S. and globally. Uncertainty surrounding the trade negotiations has sent many traders fleeing to safer investments, such as bonds and gold.

Still, investors have been in a buying mood most of this week because they're betting the Federal Reserve will cut interest rates this year. Fed Chairman Jerome H. Powell said Tuesday that the central bank would act as appropriate if the Trump administration's disputes with China and Mexico threatened U.S. economic expansion.

Cyclical stocks, such as those in chip-related sectors, were in demand, with Advantest Corp up 4.7% and Tokyo Electron rising 2.8%. Other exporters also gained, with TDK Corp rising 2.3% and Fanuc Corp adding 1.5%.

Hitachi High-Technologies was untraded with a glut of buy orders after reports that parent Hitachi Ltd is considering turning the company into a 100% subsidiary. The buy orders indicate a 15% jump to a daily limit-high of 5,450 yen.

ECONOMIC NEWS: Japan Household Spending Up 1.3% On Year In April -- Japan average of household spending was up 1.3% on year in April, coming in at 301,136 yen, the ministry of Communications and Internal Affairs said on Friday, down from 2.1% in March. The average of monthly income per household stood at 525,927 yen, up an annual 1.1%. Individually, spending was up for food, medical care, communications, education and recreation. Spending was down for housing, fuel, furniture and clothing.

CURRENCY NEWS: Japanese yen was little softer against greenback on Friday, as investors waited on a key US jobs report that is expected to back expectations for a near-term Federal Reserve rate cut to support a slowing economy. Market participants' immediate focus was on the US non-farm payrolls data for May due later on Friday, and early signs weren't good with hiring expected to have dropped in a boost to rate doves and dollar bears. A slowdown in the US labour market was evident in a worse-than-expected ADP National Employment Report released on Wednesday, which showed private US employers added 27,000 jobs in May, the smallest monthly gain in more than nine years.

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