Investor Alert

Asia Markets

June 6, 2017, 5:44 a.m. EDT

Japan’s Nikkei slides below 20,000 as investors turn cautious

‘Fragile’ market sentiment ahead of U.K. election, ECB meeting, Comey testimony

By Kenan Machado

Bloomberg News
A pedestrian walks among sculptures in a plaza in Tokyo on Monday.

Equity markets across Asia closed mixed on Tuesday, as investors braced for the fallout from former U.S. Federal Bureau of Investigation Director James Comey’s public testimony about alleged Russian interference in the 2016 election.

Comey’s testimony is scheduled for Thursday, as are the U.K. general election and a meeting of the European Central Bank.

Investors piled into havens, including the yen; the dollar (XTUP:USDJPY)  slid to ¥109.70, its lowest point in more than six weeks. The stronger yen, which hurts Japanese exporters, weighed on Tokyo shares. The Nikkei Stock Average (NIKKEI:JP:NIK)  ended down 1%, at 19,979.90.

Shares of heavy-equipment makers—which had benefited from expectations of greater infrastructure spending in the U.S.—ended down: Komatsu (TKS:JP:6301)   by 1.9%, Hitachi Construction (TKS:JP:6305)   by 3.3% and Kubota (TKS:JP:6326) by 1.3%.

“The market sentiment remains very fragile,” said Masashi Murata, a senior currency strategist at Brown Brothers Harriman. “We can’t expect the U.S. to grow at over 3% this year, at least under the Trump administration, in the middle of political scandals.”

On Monday, the White House said President Donald Trump won’t invoke executive privilege in an attempt to block Comey from testifying. Comey is expected to face questions about whether he felt pressured to slow or halt the FBI’s investigation.

Investors also seem to have set aside hopes for economic stimulus in the U.S. anytime soon, said Bart Wakabayashi, Tokyo branch manager at State Street. “We’ve forgotten and moved on,” he said. The developments coincide with political tension in the Middle East and confusion over the U.S. Federal Reserve’s pace of rate increases, he said.

Fading hopes of the so-called Trump trade were reflected in the declines of the U.S. dollar as well.

The WSJ Dollar Index (CALCULATEDFEED:XX:BUXX)  , a measure of the dollar against 16 other currencies, was down 0.2% at 88.15, close to where it was on Nov. 8, before Trump’s victory sent the dollar soaring. The dollar was roughly down 0.2% (XTUP:USDEUR)  against the euro and (XTUP:USDGBP)  the pound.

Elsewhere in region, Australia’s S&P/ASX 200 (S&P:AU:XJO)   extended early declines to close 1.5% lower. Brokerages there cut their estimates of first-quarter economic growth to the lowest since the third quarter of 2009. That came as Australia posted a current-account deficit for the quarter, the first since 1975.

Taiwan’s Taiex index   fell 0.2% as investors sold shares of Apple’s component makers. That followed a drop of nearly 1% in Apple shares (NAS:AAPL)  on profit-taking after the company introduced new products at a conference.

Hong Kong’s Hang Seng Index (HONG:HK:HSI)  was the region’s best-performing equities market, ending Tuesday’s session up 0.5% and reversing early losses, thanks to heavy buying of Chinese property developers by mainland Chinese investors.

Among the biggest gainers, China Evergrande (HKG:HK:3333)  surged 4.8%. China Overseas Land (HKG:HK:688)   added 2.4% and China Resources Land (HKG:HK:1109)   climbed 0.7%.

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