May 18, 2017 / 2:07 AM / 8 months ago

CORRECTED-Nikkei tumbles to 2-1/2-week low as Trump allegations lower stimulus hopes

(Corrects milestone in headline and in first paragraph)

* Insurers, brokerages, banks worst performers

* Utility stocks outperform after Kansai Electric says it will restart No.4 reactor at Takahama plant

By Ayai Tomisawa

TOKYO, May 18 (Reuters) - Japanese stocks tumbled to 2-1/2-week lows on Thursday morning on worries that allegations against the U.S. President Donald Trump over his interference with a federal investigation would delay his efforts on tax cuts and economic stimulus.

The Nikkei share average dropped 1.8 percent to 19,457.75 after falling to as low as 19,449.73, the lowest since May 2.

A small but growing number of Trump’s fellow Republicans called on Wednesday for an independent probe of possible collusion between his 2016 campaign and Russia, and one even mentioned impeachment.

A strong Japanese gross domestic product data released in the early morning was offset by the White House turmoil, which dragged down Wall Street sharply overnight, where the S&P 500 and the Dow Jones Industrial Average notched their biggest one-day fall since Sept. 9.

“This GDP data could have been a catalyst for the Nikkei to touch the 20,000 mark if Trump’s turmoil did not come at this time,” said Masayuki Doshida, a senior market analyst at Rakuten Securities. “Fears that U.S. stocks may fall further in the future are keeping investors nervous.”

According to government data, Japan’s economy expanded at the fastest pace in a year in the first quarter.

Financials were the biggest hit, with all the insurance , securities and banking sectors plunging more than 3 percent.

Dai-ichi Life Holdings dived 5 percent, Sompo Holdings stumbled 3.4 percent, Nomura Holdings shedding 4 percent and Mitsubishi UFJ Financial Group declining 3.8 percent.

Exporters were hammered after the dollar fell to a three-week low of 110.53 yen on Thursday.

Honda Motor Co and Subaru Corp both dropped 2.3 percent, Tokyo Electron, Fanuc Corp and TDK Corp all tumbled around 3 percent.

Utility shares outperformed, after Kansai Electric Power Co said that it will restart the No.4 reactor at its Takahama nuclear plant.

Kansai was flat, Chugoku Electric Power rose 0.1 percent and Hokuriku Electric Power added 0.3 percent.

The broader Topix dropped 1.7 percent to 1,549.01 and the JPX-Nikkei Index 400 declined 1.7 percent to 13,822.74. (Editing by Simon Cameron-Moore)

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