May 16, 2019 / 2:47 AM / 2 months ago

Nikkei falls on weak U.S., China data, trade frictions

* Double-whammy of weak U.S., China data bad for Japan stocks-analyst

* Japan Display tumbles on 9th straight quarterly loss

By Ayai Tomisawa

TOKYO, May 16 (Reuters) - Japan’s Nikkei fell on Thursday as weak U.S. and Chinese economic data and Sino-U.S. trade frictions soured sentiment, while banks tumbled on weak earnings reports.

The Nikkei share average shed 1.1% to 20,969.69 points by midmorning.

Adding to worries about the trade war which has already dragged down the Japanese market by 5.4% this month, the U.S. Commerce Department said on Wednesday it is adding China’s Huawei Technologies Co Ltd and 70 affiliates to its so-called “Entity List.”

On Wednesday, U.S. retail sales posted a surprise drop in April as consumers pulled back on their spending, according to the U.S. Commerce Department. A separate report from the Labor Department showed U.S. industrial production also unexpectedly dipped in April.

“Most investors expected that the U.S. economy would be strong, so it shocked the market, especially after weak China’s economic data,” said Hiroyuki Ueno, a senior strategist at Sumitomo Mitsui Trust Asset Management.

China reported surprisingly weaker growth in retail sales and industrial output for April on Wednesday, raising fresh questions about the health of its economy as the U.S. ramps up trade pressure.

“It sends a cautionary signal on the soundness of (China’s) domestic economy, when external uncertainty has been elevated,” economists at Bank Of America Merrill Lynch wrote in a research note.

“In addition to a modest hit to exports, negative spillovers to business confidence are likely in the near future. In the near term, policy makers will likely keep policy easing in place and be more accommodative until after a trade deal.”

The broader Topix fell 0.8% to 1,531.92, with most cyclical sectors in the red. Domestic-demand sectors such as utility, construction and railway attracted buyers.

Exporters fell, with Fanuc falling 1.3%, Murata Manufacturing shedding 2.2% and Advantest Corp tumbling 5.4%.

Mega banks were sold, with Mitsubishi UFJ Financial Group dropping 3.4% to 495.5 yen, the lowest level since November 2016, after the bank reported an 11.8% fall in its net profit for the last fiscal year ended March 2019.

Mizuho Financial Group shed 1.9% to 161.2 yen, the lowest since last December, after its net profit tumbled 83% to 96.6 billion yen for the last fiscal year, though it forecast a net profit of 470 billion yen for this fiscal year, more than four-fold recovery on the year.

Japan Display plunged as much as 11% after it posted a ninth straight quarterly loss. Its net loss for the three months ended March was 98.6 billion yen, versus a 147 billion yen loss a year earlier. (Editing by Kim Coghill)

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