June 19, 2018 / 2:55 AM / 3 months ago

Nikkei tumbles soured by selling in China market as trade war escalates

TOKYO (Reuters) - Japanese stocks tumbled to 2-1/2-week lows on Tuesday and posted the biggest daily percentage drop in three months after Chinese stocks were sold sharply amid escalating global trade tussles.

FILE PHOTO: People walk past an electronic board showing Japan's Nikkei average outside a brokerage in Tokyo, Japan, March 23, 2018. REUTERS/Toru Hanai

The Nikkei share average .N225 ended 1.8 percent lower at 22,278.48, the lowest closing level since June 1. The index posted the biggest daily percentage drop since mid-March.

The broader Topix .TOPX declined 1.6 percent to 1,743.92.

U.S. President Donald Trump threatened to impose a 10 percent tariff on $200 billion of Chinese goods, prompting a swift warning of retaliation from Beijing as the trade conflict quickly escalated.

Chihiro Ohta, general manager of investment research at SMBC Nikko Securities, said that developments in the global trade war could keep the Nikkei volatile this week, with the immediate support level seen at a recent low of 21,931.65 hit on May 30.

“The mood was already sour in the morning but it deteriorated after Chinese shares reacted to the news. This pushed investors to hedge against further drops by selling futures,” Ohta said.

With Washington and Beijing appearing increasingly headed towards open trade conflict, investors dumped shares in companies geared to global trade and Chinese demand.

Shin-Etsu Chemical (4063.T) fell 3.7 percent, while construction equipment maker Komatsu (6301.T) shed 2.5 percent.

Meanwhile, flea market app operator Mercari Inc (4385.T) ended at 5,300 yen, 77 percent above its IPO price of 3,000 yen in its Tokyo stock market debut, underscoring strong investor appetite for a rare Japanese unicorn - a tech startup valued at more than $1 billion.

“We have a rush of IPOs, a total of 11 by the end of month. While major shares are being hampered by trade concerns, investors’ focus could shift to start-up shares,” said Masayuki Doshida, senior market analyst at Rakuten Securities.

Reporting by Ayai Tomisawa; Editing by Eric Meijer

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