Japanese stocks join global sell-off after Apple China warning

Japan is playing catch-up in the global stocks rout.The country's ...

Posted: Jan 4, 2019 12:35 PM
Updated: Jan 4, 2019 12:35 PM

Japan is playing catch-up in the global stocks rout.

The country's Nikkei index dropped 2.3% Friday, in the market's first day of trading following the New Year break.

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The losses came on the back of a 660-point fall in the Dow Thursday, after Apple (APPL) warned it will badly miss its quarterly sales forecast because of weakening growth in China.

"For Japanese markets, the return from the New Year's day holidays has been bitter," said Jingyi Pan, a Singapore-based market strategist at broker IG Group.

Among the stocks hit in Tokyo were Apple suppliers Sharp (SHCAY) — which fell more than 4% — and Kyocera (KYOCY), which fell nearly 2%.

Apple, among the world's most widely held stocks, on Thursday plummeted 10% in its darkest day in six years.

The news sent shudders through global markets. The Nasdaq plunged 3%, closing back in bear market territory. The S&P 500 shed 2.5%, led lower by tech and industrial stocks. The market ended near the lows of the day.

Elsewhere in Asia, Hong Kong's Hang Seng and China's Shanghai Composite were up between 1% and 2% in afternoon trading. That followed a statement from China's Commerce Ministry that a US government delegation would resume trade talks in China early next week.

The announcement "bucked the trend of negative news" on China this week, said David Madden, an analyst at broker CMC Markets.

Dismal run

Like many other major markets, Japanese stocks are on a dismal run. The Nikkei fell about 15% last year, more than double the loss of the Dow in 2018.

Traders may also have been spooked by movements in the yen Thursday, when the Japanese currency unexpectedly rose sharply against the dollar. A stronger yen is often bad for Japanese stocks, because it can hurt corporate earnings in the country's large export sector.

Investors may find little comfort in the strength of Japan's economy.

Japan until recently enjoyed its longest streak of economic growth in decades, but the economy started to sputter in 2018. It shrank at an annualized rate of 1.2% in the third quarter of last year. That's despite years of unorthodox monetary policies aimed at stimulating growth.

The world's third-biggest economy faces serious challenges, including a rapidly aging population, a lack of women in the workforce and stubbornly low inflation.

An anticipated rise in consumption tax later in 2019 could also weigh on the Japanese economy.

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