Nikkei tumbles on trade war fears, machinery firms with China exposure worst hit

  • Reuters
  • Stock Market News
Nikkei tumbles on trade war fears, machinery firms with China exposure worst hit
Credit: © Reuters.

* Firms with large exposure to China underperform

* Global trade tensions, U.S. foreign policy unnerve market

* Nikkei dropped 4.9 percent for the week

* Topix posts biggest turnover since mid-February

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By Ayai Tomisawa

TOKYO, March 23 (Reuters) - Japan's Nikkei share average tumbled on Friday to its lowest level in more than five months as concerns over escalating global trade tensions triggered a spike in the yen, with machinery makers hit particularly hard.

U.S. President Donald Trump signed a presidential memorandum on Thursday that will target up to $60 billion in Chinese goods with tariffs. They will kick in after a 30-day consultation period. benchmark Nikkei .N225 ended 4.5 percent lower at 20,617.86, its biggest daily percentage drop since early February and its lowest closing level since Oct. 3.

For the week, the benchmark index tumbled 4.9 percent, the biggest weekly percentage fall since early February as well.

The broader Topix .TOPX declined 3.6 percent to 1,664.94, with all of its 33 subsectors in negative territory. Trade was heavy, posting a turnover of 3.6 trillion yen, the biggest since mid-February.

"When there is a trade war about to start between the world's two largest economies, who is not worried about the impact on the real economy?," asked Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley (NYSE: MS ) Securities.

Japanese companies with heavy exposure to China fell sharply, with the machinery sector .IMCHN.T slumping 5.6 percent, the biggest loser on the board. Construction equipment maker Komatsu 6301.T tumbled 6.3 percent.

Machine tool makers also were hammered, with Makino Milling Machine 6135.T sliding 6.1 percent and Okuma Corp 6103.T nosediving 7.4 percent.

Industrial robot maker Fanuc Corp 6954.T fell 4.4 percent, semiconductor equipment makers Advantest 6857.T and Tokyo Electron 8035.T dropped 4.1 percent and 5.7 percent, respectively.

News that Trump replaced H.R. McMaster as national security adviser with John Bolton, a hawk who has advocated using military force against North Korea and Iran, also hurt investor sentiment.

"Uncertainty over foreign policy of the Trump administration is increasing and it may last for a while," said Masahiro Yamaguchi, a senior market analyst at SMBC Trust Bank.

The dollar fell as low as 104.635 yen in early Asian trade on Friday, its lowest level since November 2016, stoking concerns that the Japanese currency's strength will sap the earnings of Japanese companies.

Exporters also faced heavy selling, with Honda Motor Corp 7267.T falling 5.3 percent and TDK Corp 6762.T shedding 5.2 percent.

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