Nikkei drops as hawkish Fed and trade concerns curb risk appetite

TOKYO (Reuters) - Japan’s Nikkei share average dropped on Thursday after the U.S. Federal Reserve forecast a slightly faster pace of rate hikes this year, while concerns about a U.S.-China trade war also hurt sentiment.

FILE PHOTO: A man looks at a mobile phone next to an electronic board showing Japan's Nikkei average outside a brokerage in Tokyo, Japan, March 23, 2018. REUTERS/Toru Hanai

The Nikkei .N225 ended down 0.99 percent to 22,738.61.

As expected, the Fed raised its benchmark overnight lending rate a quarter of a percentage point to a range of 1.75 percent to 2 percent, on the back of strong U.S. economic growth. Policymakers also projected a slightly faster pace of rate increases in the coming months.

Worries about global trade also dented investors’ risk sentiment. U.S. President Donald Trump is expected to meet top trade advisers to decide whether to activate threatened tariffs on billions of dollars in Chinese goods.

“The Fed’s hawkish tone does not help the market, which is more worried about a global trade war, which would have a negative impact for a much longer term,” said Takuya Takahashi, a strategist at Daiwa Securities.

Shares of exporters such as automakers and electronics stocks came under pressure.

Nissan Motor Co 7201.T fell 1.3 percent, Hitachi 6501.T shed 2.05 percent and Panasonic Corp 6752.T dropped 1.89 percent.

Mining stocks underperformed after oil prices eased, with Inpex Corp 1605.T losing 2.23 percent.

Shippers bucked the broader weakness and advanced after the Baltic Dry Index .BADI, or freight charges, rose overnight. Mitsui OSK Lines 9104.T gained 1.25 percent and Nippon Yusen 9101.T added 1.09 percent.

The broader Topix .TOPX dropped 0.92 percent to 1,783.89.

Reporting by Ayai Tomisawa and the Tokyo markets team; Editing by Sam Holmes