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Japan Nikkei tumbles on weak growth data
(14 Nov 2019, 10:03)
Headline indices of the Japan share market declined on Thursday, 14 November 2019, as risk aversion selloff triggered as the yen's appreciation against the U.S. dollar, weaker-than-expected growth data in Japan, and ongoing doubts over a US-China trade deal. Around late afternoon, the 225-issue Nikkei Stock Average declined 249.85 points, or 1.1%, to 23,070.02, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange sank 19.82 points, or 1.17%, at 1,680.51.

Total 30 issues of the 33 industry category of Topix index declined into negative territory, with Pulp & Paper, Textiles & Apparels, Rubber Products, Iron & Steel, Oil & Coal Products, Marine Transportation, Glass & Ceramics Products, and Machinery issues being notable losers.

The world's third-largest economy grew an annualised 0.2% in the third quarter, slowing sharply from a revised 1.8% expansion in April-June, and marked the weakest growth since a 2.0% contraction in July-September last year, preliminary gross domestic product (GDP) data released by the government showed on Thursday. Japan's preliminary gross domestic product (GDP) data is keeping pressure on policymakers to ramp up stimulus to bolster a fragile recovery.

Private consumption also cooled from the previous quarter, casting doubt on the Bank of Japan's view that robust domestic demand will offset the impact from intensifying global risks. Private consumption grew 0.4% in July-September, slowing from a 0.6% increase in the previous quarter.

Further, soft Chinese economic data also hurt risk sentiments. China's industrial production, a measure of growth in sectors such as manufacturing, mining and utilities, expanded by 4.7% cent last month, down from 5.8% in September. In another piece of data released by China's National Bureau of Statistics (NBS) on Thursday, fixed asset investment, purchases of capital goods, real estate and infrastructure, grew by 5.2% in the first 10 months of the year, down from September's reading of 5.4%. Retail sales, a key metric of consumption in the world's most populous nation, grew by 7.2% in October from a year previous.

A Beijing-based think tank has become the first Chinese economic research institute linked to the government to predict that China's economic growth rate will slow below 6.0% next year. The National Institution for Finance and Development (NIFD) on Wednesday said that China's economic growth rate will slow to 5.8% in 2020 from an estimated 6.1% this year. This is at the bottom end of China's target range of 6 to 6.5% growth for 2019, and further indicates the continued downward pressure on the economy from the trade war with the United States as well as domestic headwinds.

In Sino-US trade deal, uncertainty about a potential deal between the world's two biggest economies remain on the table as President Donald Trump failed to offer many details about the trade talks in a speech on Tuesday.

President Trump said China had agreed to buy up to $50 billion in U.S. soybeans, pork and other agricultural products annually, but China is reluctant to put a numerical commitment in the text of a potential agreement. The dispute over farm purchases is one of several issues that have delayed completion of the limited trade accord announced by Trump and Chinese Vice Premier Liu He on Oct. 11. Both sides are also at odds over when and by how much the U.S. would agree to lift tariffs on Chinese imports. Chinese officials have also resisted U.S. demands for a strong enforcement mechanism for the deal and curbs on the forced transfer of technology for companies seeking to do business in China.

In remarks at the Economic Club of New York, Trump claimed the Chinese are dying to make a deal and an agreement is close, although investors had been hoping for more substantive comments. The president said a significant phase one trade deal with China could happen soon but stressed that he would only accept an agreement that is good for U.S. companies and workers.

Impeachment inquiries on U.S. President Donald Trump as well as geopolitical tensions such as the escalating anti-government protests in Hong Kong are factors that investors are keeping a close eye on.

CURRENCY NEWS: The Japanese yen, often viewed as a safe-haven currency in times of economic uncertainty, appreciated against greenback. The Japanese yen traded at 108.79 against the dollar after strengthening from levels above 108.9 in the previous session.

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