Japan’s Nikkei falls as US-Iran peace talks falter

TOKYO: Japan’s Nikkei share average slipped 1% on Monday as the collapse of US-Iran peace talks and reports of a US Navy plan to block the Strait of Hormuz cast fresh doubts on the durability of an ongoing ceasefire.

The Nikkei was down 1% at 56,357.40, as of midday break, after posting its steepest weekly gain in more than a year last week.

The broader Topix slid 0.5% in choppy trading to 3,721.78.

US President Donald Trump said on Sunday the US Navy would start blocking the Strait of Hormuz, a choke point for 20% of the world’s daily energy supplies that Iran effectively closed since the war started in late February.

The announcement drove oil prices to jump above $100 a barrel in early trade on Monday.

“I don’t think there are that many investors who expected everything to be agreed (at the weekend talks) and for everything to go smoothly,” said Shuutaro Yasuda, market analyst at Tokai Tokyo Intelligence Laboratory.

“That said, it’s obviously not good news, so stocks are falling. But I think the reason we’re not seeing a really extreme risk-off move is exactly that.”

Across the Tokyo Stock Exchange’s 33 industry sub-indexes, energy exploration stocks stood out with a 3.2% gain.

In contrast, electric power and gas and air transport each lost 1.8%.

Market breadth was negative, with 162 stocks falling versus 62 advancing in the Nikkei, led by losses in semiconductor-related stocks.

Ibiden, a chip packaging and electronics firm, recorded the steepest drop among blue chips, falling 4.3%.

Tokyo Electron, a major semiconductor equipment maker, also weighed heavily in the index, declining 3.7%. Still, solid corporate earnings helped limit the decline in market sentiment, said Hiroshi Namioka, chief strategist and fund manager at T&D Asset Management.

Yaskawa Electric, an industrial robots and motion control systems maker, was among the Nikkei’s biggest percentage gainers, up 5.7%. Ryohin Keikaku, operator of MUJI brand, rose as much as 4.6% before paring gains to 1.3%.

“Although the overall market is paying attention to earnings, when it comes to sector selection, there’s no doubt that the moves are being driven by expectations of crude oil prices,” Namioka said.