June 3, 2019 / 3:11 AM / 6 months ago

CORRECTED-Nikkei hits over 4-1/2-month low as global slowdown worries loom large

(Corrects Topix milestone to lowest since Jan. 4, not late December, in first bullet & 13th paragraph)

* Nikkei falls to lowest since mid-Jan, Topix at lowest since Jan. 4

* Exporters, mining stocks weak

* Cocokara Fine soars on merger talks with Sugi

By Ayai Tomisawa

TOKYO, June 3 (Reuters) - Japan’s benchmark stock index tumbled to a more than 4-1/2-month low on Monday morning, as risk sentiment was hurt due to worries that a prolonged U.S.-China trade war and Washington’s tariff threat to Mexico could derail the global economy.

The Nikkei share average fell as much as 1.4% to 20,305.74 in early trade, the lowest since Jan. 15, before it trimmed the losses and was down 1.2% at 20,361.76 at the midday break.

The strengthening of yen also hurt the mood, battering exporters. The dollar was flat at 108.23 yen, recovering from 108.17, its lowest since Jan. 15.

Shares of Fanuc Corp tumbled 2.7%, Yaskawa Electric declined 1.6%, Tokyo Electron shed 2.1% and Komatsu Ltd fell 2%.

A senior Chinese official said on Sunday that United States cannot use pressure to force a trade deal on China, refusing to be drawn on whether the leaders of the two countries would meet at the G20 summit to bash out an agreement.

China threatened on Friday to unveil an unprecedented hit-list of “unreliable” foreign firms, groups and individuals that harm the interests of Chinese companies, as a slate of retaliatory tariffs on imported U.S. goods.

“Investors’ main concern is that the trade war may hurt global growth,” said Toru Ibayashi, executive director of wealth management at UBS Securities, Japan, adding that the Nikkei could fall further.

On Monday, a private business survey showed that China’s factory activity expanded at a steady but modest pace in May, but the overall economic picture was mixed as output growth slipped and factory prices stalled.

“The U.S. manufacturing growth is also slowing. Moreover, we may not be able to avoid a negative impact to the Japanese auto industry from U.S.-Mexico issues,” Ibayashi said.

U.S. President Donald Trump, incensed by a surge of illegal immigrants across the southern border, vowed on Thursday to impose a tariff on all goods coming from Mexico, starting at 5% and ratcheting higher until the flow of people ceases.

On Saturday, Mexico’s president hinted his country could tighten migration controls to defuse Trump’s threat to impose tariffs on Mexican goods, and said he expected “good results” from talks planned in Washington next week.

Mining stocks also lost ground, after oil prices on Monday extended losses over 5% from Friday. Inpex Corp stumbled 2.5%, while Japan Petroleum Exploration Co plunged 3.7%.

The broader Topix dropped 1% to 1,496.72, after falling to as low as 1,490.28, the weakest level since Jan. 4.

Buying in defensive stocks reflected investors’ risk-averse stance. Utility and real estate shares outperformed, with Tokyo Electric Power rising 1.6% and Mitsubishi Estate soaring 2.5%.

Meanwhile, drugstore operator Cocokara Fine jumped 16.5% to a daily limit high of 4,905 yen after the company said it is discussing a merger with Sugi Holdings.

Reporting by Ayai Tomisawa; Editing by Rashmi Aich

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