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

TOKYO (Reuters) - Japanese stocks fell on Monday 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.

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

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 9503.T dropped 1.9 percent though it said no irregularities had been detected at the Mihama, Takahama and Ohi nuclear plants after the quake. Osaka Gas 9532.T 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 1852.T rose 1.3 percent, Mori-gumi 1853.T 1.6 percent and Okumura Corp 1833.T rose 0.1 percent.

The Nikkei share average .N225 dropped 0.8 percent to 22,680.33, after falling to as low as 22,601.13, the lowest point since June 6.

Manufacturers of construction equipment makers such as Komatsu Ltd 6301.T and Hitachi Construction Machinery 6305.T tumbled 3.9 percent and 2.8 percent, respectively, while shares that rely on global capital expenditure to sustain demand followed suit. Industrial robot maker Fanuc Corp 6954.T dropped 1.8 percent and Yaskawa Electric 6506.T skidded 3.0 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.

The broader Topix .TOPX declined 1.0 percent to 1,771.43, its lowest finish since June 1, with decliners outnumbering gainers by 3 to 1.

Reporting by Ayai Tomisawa; Editing by Eric Meijer