Nikkei hits 3-week low on worries about China, rising US yields

TOKYO: Japan's Nikkei fell to a three-week low on Tuesday after shares of firms with big exposure to China languished on worries about its economy while chip equipment makers tumbled, tracking weakness in US tech firms overnight.

The Nikkei share average ended 1.3 per cent lower to 23,469.39, the weakest closing level since Sept. 18.

Markets in Japan were closed for a holiday on Monday, when Chinese stocks tumbled and the yuan weakened on growing fears the economic impact of the Sino-US trade war will deepen.


Analysts also said rising US yields, which would reduce the allure of stocks, triggering a sell-off in Japanese futures. In Asian trade, US 10-year Treasury yields hit a fresh seven-year high of 3.252 per cent.

"There is a concern in the market now which was not seen when the 10-year US Treasury yield was trading around 2.8 per cent," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities, adding that when US yields keep rising, stocks with high valuations come under pressure.

"The market got caught off-guard by that."

Exporters were sold after the safe-haven yen extended gains against the dollar to a fourth straight session, reaching 113.25 in Asian trade. Last week, it hit a nearly 11-month low of 114.54 yen per dollar.

Toyota Motor and Honda Motor both dropped 3.1 per cent.

Construction machinery makers as well as electronics component manufacturers, which are exposed to the Chinese market, were sold off. Hitachi Construction Machinery slid 2.0 per cent, industrial robot maker Fanuc 2.5 per cent and Murata Manufacturing Co 2.2 per cent.

The Philadelphia SE Semiconductor Index fell 1.1 per cent overnight, hurting Japanese chip-related stocks. Tokyo Electron tumbled 4.5 per cent, Screen Holdings stumbled 5.6 per cent and Advantest Corp 4.4 per cent.

The broader Topix dropped 1.8 per cent to 1,761.12.