June 18, 2018 / 2:53 AM / 4 months ago

Nikkei drops as trade tensions escalate, Osaka quake hits utility stocks

TOKYO, June 18 (Reuters) - Japanese stocks fell on Monday morning as an escalating trade dispute between the United States and China stoked concerns about the impact on global demand, triggering a sell-off in stocks such as makers of construction equipment.

Also denting sentiment was a magnitude-6.1 earthquake in Osaka in western Japan on Monday, hitting the shares of utility companies headquartered in the Kansai region.

Kansai Electric dropped 1.5 percent though it said no irregularities had been detected at the Mihama, Takahama and Ohi nuclear plants after the quake. Osaka Gas stumbled 3.4 percent.

On the other hand, contractors based in the Kansai region soared on speculation that construction demand will rise after the earthquake.

Asanuma Corp surged 2.6 percent, Mori-gumi soared 3.1 percent while Okumura Corp rose 1.6 percent.

The Nikkei share average dropped 1.0 percent to 22,635.60 in midmorning trade, after falling to as low as 22,626.07, the lowest point since June 6.

Manufacturers of construction equipment makers such as Komatsu Ltd and Hitachi Construction Machinery tumbled 3.7 percent and 3.4 percent, respectively, while shares that rely on global capital expenditure to sustain demand followed suit.

Industrial robot maker Fanuc Corp dropped 2.9 percent and Yaskawa Electric skidded 4.9 percent.

U.S. President Donald Trump unveiled an initial list of strategically important goods that would be subject to a 25 percent tariff effective July 6, a move China’s Commerce Ministry called “a threat to China’s economic interest and security”.

China issued its own list of U.S. imports subject to tariffs, targeting soybeans, aircraft, cars and chemicals.

“The U.S. is not only after China, it’s after a lot of countries in the world. Investors are worried that the trade war would eventually hit global demand,” said Yutaka Miura, a senior technical analyst at Mizuho Securities.

Non-ferrous metal stocks also lost ground, with Sumitomo Metal Mining stumbling 3.3 percent and Mitsubishi Materials shedding 1.9 percent.

The broader Topix declined 1.1 percent to 1,769.44. (Reporting by Ayai Tomisawa Editing by Eric Meijer)

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