Japan Stocks gain on yen softer tone

Japan share market were higher on Thursday, 23 August 2018, as yen depreciation to upper 110 zone against greenback, optimistic media reports on U.S.-Mexico trade talks and the U.S.-Turkey crisis over a detained American pastor supported risk appetite buying. However, market gain was limited as some market participants were sitting on the fence ahead of outcome of U.S.-China trade talks. Total 17 issues out of 33 TSE index declined, while remaining 16 issues were higher, with shares of Rubber Products, Transportation Equipment, Nonferrous Metals, Iron & Steel, and Mining issues being notable losers, while Oil & Coal Products, Pulp & Paper, Retail Trade, Air Transportation, and Services issues were notable gainers. In late afternoon trade, the benchmark Nikkei 225 index rose 0.2%, or 41.35 points, to 22,403.90. The broader Topix index of all First Section issues on the Tokyo Stock Exchange dropped 0.06%, or 1.09 points, to 1,697.28.

Many market participants are awaiting outcome of the lower-level trade talks between the United States and China due Thursday. U.S. and Chinese officials met for the first time in over two months to find a way out of their deepening trade conflict, but there was no evidence the low-level discussions would halt a new round of U.S. tariffs due Thursday.

Instead, President Donald Trump is going ahead with escalating the China trade war. The U.S. slaps Trump tariffs on $16 billion worth of Chinese products on Thursday, with China set to retaliate. The U.S. and China already set tariffs on $34 billion worth of goods, with America mulling Trump tariffs on a further $200 billion.

U.S. Fed Chair Jerome Powell and other central bankers will meet at Jackson Hole on Friday to discuss the root causes of stubbornly low inflation, slow wage growth and tepid productivity gains.

Political developments in the United States have had limited effects, at least so far. US President Donald Trump's former lawyer, Michael Cohen, pleaded guilty to campaign finance violations on Tuesday and former campaign manager, Paul Manafort, was found guilty on charges of tax and bank fraud.

Shares in retailers inclined, led by Nitori Holdings, up more than 3% after discount furniture store operator August same-store-sales rose 0.7%. The result beat expectations and soothed investor concerns that the company would find it hard to post an on-year gain after a lofty 14% rise a year earlier. Other retail stocks also gained ground, with Aeon rising 1.3% and Fast Retailing up 2.4%.

Shares of automaker, tire makers and autoparts makers declined after German automotive supplier Continental AG tumbled 13% on the back of a profit warning. Toyota Motor Corp fell 1.2%, while Nissan Motor Co dropped 1.3%, Bridgestone Corp 1.8%, Yokohama Rubber 2.3%, Denso Corp 3.1% and Tokai Rika 2.5%.

ECONOMIC NEWS: Japan manufacturing sector continued to expand in August with a manufacturing PMI score of 52.5, the latest survey from Nikkei revealed on Thursday. That's up from 52.3 in July, and it moves farther above the boom-or-bust line of 50 that separates expansion from contraction. Individually, input and output price inflation climbed to multi-year highs, while overall demand improved - although export orders failed to rise for a third straight month.

CURRENCY NEWS: The Japanese yen depreciated to upper 110 yen zone against U.S. dollar and a basket of major peers on Thursday.

OFFSHORE MARKET NEWS, US stock market closed mixed on Wednesday, as investors digested a batch of earnings, housing data and minutes from the latest Federal Open Market Committee's most recent meeting reaffirming the central bank's hawkish bias. The Dow Jones Industrial Average declined 0.34%, while the S&P 500 index declined 0.04%, and the NASDAQ Composite index gained 0.38%.

The major European stock markets ended broadly flat on Wednesday amidst trade talks between the US and China and uncertainty over US President Donald Trump's legal woes. The pan-European STOXX600 index closed flat. The German DAX index was flat and the UK FTSE index rose by 0.1%.

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