January 29, 2019 / 3:07 AM / 9 months ago

Nikkei falls, pulled down by machinery firms, chip-related shares

* Chip-related shares plunge after Nvidia disappoints

* Earnings of Alps, Shin-Etsu earnings awaited

* Defensive stocks buck the trend and rise

By Ayai Tomisawa

TOKYO, Jan 29 (Reuters) - Japan’s Nikkei fell on Tuesday as warnings from U.S. industry bellwethers Caterpillar and Nvidia dragged down shares of construction machinery makers and chip-related companies.

The Nikkei share average declined 1.0 percent to 20,448.47 at the midday break.

Japanese machinery and electric machinery sectors were the worst performers on the board, falling 2.6 percent and 2.2 percent, respectively.

Caterpillar Inc on Monday missed quarterly earnings estimates, hurt by soft Chinese demand, higher manufacturing and freight costs.

Nvidia Corp cut its fourth-quarter revenue estimate by half a billion dollars because of weak demand for its gaming chips in China and lower-than-expected data centre sales.

Komatsu Ltd and Hitachi Construction Machinery both plunged more than 5 percent.

“We expected that slowing China demand would hit global manufacturers’ earnings to some extent but their missing their estimates was shocking,” said Yoshinori Shigemi, global market strategist at JPMorgan Asset Management.

The downbeat results from the U.S. manufacturers point to troubles for Japanese machinery makers already struggling with declining orders from China, he said.

“The market is cautious against earnings of manufacturers which have large exposure to China,” Shigemi said.

Chip-related stocks also lost ground after Nvidia’s estimate cut.

Tokyo Electron shed 3.8 percent and Advantest Corp tumbled 7 percent and Screen Holdings dropped 7.6 percent.

Silicon products maker Sumco Corp stumbled 5.3 percent and Shin-Etsu Chemical lost 2.5 percent.

Bucking Tuesday’s trend, defensive stocks such as utility, food and railway names shined. Tokyo Electric Power Co rose 2.2 percent, Nissin Foods Holdings gained 0.9 percent and Central Japan Railway added 0.7 percent.

The broader Topix dropped 0.7 percent to 1,544.14. Declining issues outnumbered advancing ones 1,440 to 603.

Alps Alpine Co, Shin-Etsu Chemical are due to report their quarterly earnings on Tuesday, while TDK Corp and Canon Inc are slated for Wednesday. (Editing by Richard Borsuk)

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