Japan Stocks close down on profit-taking

The Japan share market closed lower on Monday, 16 December 2019, with traders taking money off the table following a rally in the previous session that was fuelled by a US-China trade deal and Britain's election. At closing bell, the 225-issue Nikkei Stock Average fell 70.75 points, or 0.29%, to 23,952.35, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange dropped 3.11 points, or 0.18%, at 1,736.87.

Total 23 issues of the 33 industry category of Topix index dived into negative territory, with Rubber Products, Marine Transportation, Metal Products, Pharmaceutical, and Glass & Ceramics Products issues being notable losers, while Fishery, Agriculture & Forestry, Real Estate, and Services issues were notable gainers.

The market got off to a weak start, weighed down by profit-taking, as well as by selling on a halt in the yen's depreciation against the dollar and weak performance of Nikkei futures. But the market's downside was limited, as worry about an escalation of the U.S.-China trade war receded after Washington and Beijing reached their phase one deal Friday and refrained from slapping fresh tariffs on each other's goods Sunday.

The United States and China have reached an historic and enforceable agreement on a Phase One trade deal that requires structural reforms and other changes to China's economic and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange. The "Phase 1" agreement means that the U.S. won't impose new tariffs on Chinese goods that had been scheduled for Sunday. In addition to canceling the new tariffs, the U.S. also agreed to reduce certain existing import taxes on about $112 billion in Chinese goods from 15% to 7.5%. In return, Trump said that the Chinese have agreed to "massive" purchases of American farm and manufactured products as part of the initial deal. The president said a so-called phase-two deal will be discussed immediately rather than after the 2020 presidential election. The two major economies plan to sign the partial accord in the first week of January.

The long-awaited deal could dial down tensions between the United States and China and provide some relief to investors, who have been buffeted for months by worries that a full-blown trade war would pressure global economic growth.

Meanwhile, U.K. Prime Minister Johnson's Conservative Party swept to a landslide victory in elections on Thursday, securing a strong majority in Parliament. The convincing win gives him support to secure a Brexit deal and negotiate a new relationship with the European Union next year. Brexit concerns have been cited as one lingering headwind for global investors.

Astellas fell after Merrill Lynch Japan Securities Co. downgraded its investment rating for the drugmaker. Among other losers were clothing store chain Fast Retailing and industrial robot producer Fanuc. On the other hand, realtors including Mitsubishi Estate and Mitsui Fudosan attracted purchases. Nintendo rose on hopes for strong sales of the Nintendo Switch and other consoles in the Christmas shopping season. Also on the positive side were technology investor SoftBank Group and cosmetics firm Shiseido.

CURRENCY NEWS: The Japanese yen, often viewed as a safe-haven currency in times of economic uncertainty, depreciated against greenback and other major currencies as news of an initial China-U.S. trade deal and an election victory for Britain's Brexit-backing Conservative Party appeared to clear the fog on the global investment horizon, hurting safe-haven demand. The Japanese yen traded at 109.35 against the dollar, weakening from 109.27 the day before.

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