Japan saw its Nikkei 225 index log its biggest loss since December 25, on a new wave of concerns that the global economy is slowing, a view that we at Classiarius have taken since October 2018. The new sell-off has come after the US and Europe released weaker-than-expected economic releases. Investors sold shares and look for short-term havens in FX and bonds, while some just moved to the sidelines.
The current US – China trade talks hang over the China economy and the upcoming decision by newly charged Donald Trump will be whether or not to add to the current tariffs. Clearly President Trump is using his game theory team to work on North Korea and China as both of his opponents seem to be off balance at all times.
Here in Japan the stock market dropped 650 points to close at 20,977, its lowest level since February 15. The broader Topix index which covers all first section names on the Tokyo Stock Exchange finished lower by 2.45 percent and settling at 1,577.41.
The ongoing weakness in economic data plus the trade talks will add to pressure on Japanese stocks as the recent GDP view has been discouraging. Japanese economic strength is fading, in line with the US and China. This was more or less understood months ago as the Chinese economy has been under ongoing pressure from debt and manufacturing overhang.
The short-lived optimism surrounding US-China trade and the dovish central bank messaging have contributed to a rally in equity at the start of the year but this short-term party is fading and global equity is now repricing lower.