June 20, 2018 / 3:12 AM / in a month

Nikkei rises in volatile trade helped by China stock gains

TOKYO (Reuters) - Japan’s Nikkei share average rose in volatile trade on Wednesday, helped by late short-covering following an earlier selloff and a broader recovery in regional sentiment as Chinese shares recovered from a rout in the previous session.

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

Like other markets, Tokyo-listed stocks were knocked heavily on Tuesday as the tit-for-tat trade dispute between China and the United States escalated, with Japanese firms reliant on Chinese demand hit particularly hard.

The Nikkei .N225 ended 1.2 percent higher at 22,555.43 after dipping into negative territory earlier in the day, while the broader Topix .TOPX advanced 0.5 percent to 1,752.75.

The Nikkei’s outperformance led the ratio of Nikkei versus Topix, the so-called NT ratio, .NTIDX to 12.87, the highest level since August 2016.

The intensifying U.S.-China trade dispute has kept investors risk-averse after U.S. President Donald Trump threatened to impose a 10 percent tariff on another $200 billion of Chinese goods and Beijing warned it would retaliate.

However, in late trade in Asia, China's blue-chip CSI300 index .CSI300 gained 0.6 percent, and the Shenzhen Composite Index .SZSC rose 1.4 percent, which triggered short-covering in Japanese shares.

Analysts said investors had been monitoring Chinese market moves, and were relieved that China stocks seemed to be taking global trade tensions in their stride, if only temporarily.

“Investors confirmed Chinese markets’ resilience, and covered their short positions by buying futures,” said Yutaka Miura, a senior technical analyst at Mizuho Securities.

Large cap stocks such as Fast Retailing (9983.T) and SoftBank (9984.T) soared 3.5 percent and 2.3 percent, respectively.

Selling in machine tool makers, which rely on China’s capital expenditure, ran its course, and ended higher after investors bought back.

Okuma Corp (6103.T) rose 2.4 percent after dropping to a nine-month low in early trade, DMG Mori (6141.T) gained 1.3 percent after hitting the lowest since February 2017.

Shipping stocks .ISHIP.T stumbled 1.0 percent and were the second-worst sectoral performer after weaker metal prices stoked concerns for falling demand.

Mitsui OSK Lines (9104.T) fell 2.1 percent, while Kawasaki Kisen (9107.T) shed 0.4 percent.

Meanwhile, soy sauce maker Kikkoman (2801.T) soared 3.1 percent after soybeans came under pressure.

Other food processors and beverage drinkmakers also bucked the weaker trend, with Ajinomoto (2802.T) advancing 1.4 percent and Kirin Holdings (2503.T) soaring 3.3 percent.

Drugmakers attracted buyers, with Daiichi Sankyo (4568.T) surging 5.2 percent and Sumitomo Dainippon Pharma (4506.T) gaining 2.3 percent.

Editing by Sam Holmes

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