Japan Stocks Drop After Wild Ride as Trade Spat Rattles Market

(Bloomberg) -- Japanese stocks declined for a third day, as the latest developments in the U.S.-China trade war caused large swings in markets Tuesday.

The Topix index ended the day 0.4% lower after falling by as much as 2.9% in the morning session. The telecommunications and electronics groups were the biggest drags on the benchmark gauge, which trimmed its 2019 gain to 0.3%.

China's central bank set its daily reference rate stronger than the psychologically important 7 per dollar level, weakening the yen against the dollar and helping Japanese equities come off earlier lows. The move came after the U.S. labeled China a currency manipulator.

“China's central bank didn't make a move to weaken the yuan unexpectedly, so panicky selling ceased in the market,” said Norihiro Fujito, the chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “Uncertainties remain intact as China's real intention is unclear, so nervous sentiment may stay in the stock market for the time being.”

The Nikkei 225 Stock Average has been trading well below its moving averages, making stocks look cheap, said Katsuhiko Nakamura, senior technical analyst at Mizuho Securities Co. in Tokyo. Still that might not be enough to tempt many investors back into the market.

“The U.S.-China situation is getting worse and worse,” said Hiroshi Matsumoto, head of Japan investment at Pictet Asset Management Ltd. “Unless either one of the nations steps toward concessions, risk-off moves will likely continue in the markets.”

Summary

• Topix -0.4% to close at 1,499.23 in Tokyo
• Nikkei 225 -0.7% at 20,585.31, after falling as much as 2.9%
• Yen -0.5% at 106.48 per dollar after strengthening as much as 0.4%
• Telecommunications: SoftBank Group -2.9%, KDDI -2.5%, Nexon -1.9%
• Electronics: Murata Manufacturing -2.2%, Nidec -1.8%, Kyocera -2.1%

--With assistance from Min Jeong Lee.

To contact the reporters on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net;Shingo Kawamoto in Tokyo at skawamoto2@bloomberg.net

To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Kurt Schussler, Min Jeong Lee

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