November 7, 2018 / 7:10 AM / 10 days ago

Nikkei edges lower after U.S. midterm elections; auto shares fall

* Investors will realize Democrats are also hard on China - analyst

* China-U.S. trade war will continue to be focus - analyst

* Auto sector takes a hit on worries about trade

* Olympus, Mitsubishi Materials fall after weaker forecasts

By Ayai Tomisawa

TOKYO, Nov 7 (Reuters) - Japan’s Nikkei ended lower in volatile trade on Wednesday as investors assessed the policy impact of U.S. midterm elections, in which Democrats won control of the House of Representatives.

The Nikkei share average fell 0.3 percent to 22,085.80 points, after traversing positive and negative territory.

With President Donald Trump’s Republican party holding onto its majority in the Senate, the results were in line with market expectations.

Some market participants expect investors’ focus will now shift back to the U.S.-Sino trade war, with the U.S. and Chinese presidents set to hold talks at the upcoming G20 leaders’ summit in Argentina later this month.

“Investors will gradually realize that Democrats are hard on China as well, so what has been a worry to the financial market won’t change even after the midterm elections,” Kyoya Okazawa, head of institutional clients APAC at BNP Paribas in Hong Kong.

“The result won’t change the Trump administration’s tough trade stance with China. A House controlled by Democrats may even push for a further escalation of U.S.-China trade tensions, and even Japan can be a target (for the auto industry).”

Japan’s auto shares lost ground, with Honda Motor falling 2.7 percent and Nissan Motor dropping 1.1 percent.

Others said that the market will likely move past the elections and look to fundamentals.

“After the election, the market focus will shift from external events to fundamentals and company specific earnings,” said Jeremy Osborne, investment director at Fidelity International, Japan.

“Although the outlook for corporate earnings has dimmed somewhat, valuations are supportive...”

Olympus Corp tumbled 4.5 percent after it cut its net profit outlook for the year through March to 26 billion yen ($229.68 million) from 40 billion yen.

Mitsubishi Materials nosedived 8.3 percent after it cut its net profit forecast to 25 billion yen from 35 billion yen for the year ending March.

Bucking the weakness, telecom giant NTT Corp surged 4.9 percent after the company said it would buy back up to 150 billion of its own shares.

It also announced a mid-term business plan in which it aims for earnings per share of 640 yen for the fiscal year ending March 2024, 50 percent more than the 425 yen posted in the fiscal year ended March 2018.

The broader Topix shed 0.4 percent to 1,652.43. Declining issues outnumbered advancing ones 1,095 to 939.

$1 = 113.2000 yen Reporting by Ayai Tomisawa, editing by Eric Meijer

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