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Nikkei dips on fading US rate cut views, earnings caution

TOKYO: Japanese shares dipped on Monday as hopes for a large US Federal Reserve rate cut faded and investors took a cautious stance ahead of the domestic earnings seasons, which starts this week.

The Nikkei share average fell 0.23 per cent to 21,416.79 while the broader Topix shed 0.49 per cent to 1,556.37, with low turnover of 1.63 trillion yen, about 30 per cent below the annual average.

On Friday, US stocks fell following a Wall Street Journal report that the Federal Reserve plans to cut interest rates by only a quarter-percentage point at the end of the month.

On the whole, trading was light with many investors awaiting earnings for clues on the market, which has moved in a narrow range in the past few months on uncertainties over Sino-US trade war.

“Although the US and China have struck a truce on trade, the reality is that there was a tariff hike in June,” said Masahiro Ayukai, senior strategist at Mitsubishi UFJ Morgan Stanley Securities.

“Japan and South Korea have spats while the world’s economy is slowing down. Investors are looking to what kind of guidance companies will provide under such circumstances,” he said.

Quarterly earnings reports by Japanese companies will be in full swing later this week, with Canon and Nidec announcing results after the market close on Wednesday.

The market showed no reaction to Sunday’s Japanese upper house election, where Prime Minister Shinzo Abe’s ruling bloc won a solid majority.

The biggest movers of the day included Asahi Group Holdings , which fell 8.9 per cent after the beverage firm said it would buy the Australian operations of Anheuser-Busch InBev and issue up to 200 billion yen ($1.9 billion) of shares to fund it.

Bucking the broader decline, chip-related stocks extended their gains following upbeat earning guidance from Taiwan’s TSMC last week.

Taiyo Yuden Co Ltd rose 3.3 per cent, while Advantest Corp rose 1.9 per cent, and Screen Holdings rose 2.7 per cent.

Sanoh Industrial gained 8.4 per cent in heavy trade, having risen 30 per cent since Thursday, when the company announced it developed a battery cell that can directly convert heat into electricity.

Source: Economic Times