Japan's Nikkei dropped more than 2 per cent on Friday morning, led by SoftBank , Fast Retailing and other large-cap stocks, hit by a dull estimate for a futures and options expiry and worrisome Chinese and Japanese economic indicators.
The Nikkei share average was down 1.7 per cent at 21,439.16 at the midday break after falling as much as 2.1 percent. The index had climbed 3.2 per cent, or 668 points, in the last two days. For the week, the Nikkei has fallen 1.4 per cent.
China's November industrial output grew 5.4 per cent from a year earlier and retail sales increased 8.1 per cent, missing forecasts, official data showed on Friday.
Nikkei futures and options contracts expiring in December were estimated to settle at 21,618.88, market participants said after the Friday market open, citing estimates by brokerages. Official figure will be announced after the market close.
Investors' appetite for the Nikkei before its futures settlement was shown in the so-called NT ratio, which had soared to 13.50 on Thursday, the highest level since 1997. Traders said that selling by investors who had hoped for a higher Nikkei futures and options settlement was pressuring the market on Friday.
Among large-cap stocks, as Fast Retailing stumbled 1.5 per cent, SoftBank Group Corp dropped 3.8 per cent and FamilyMart UNY Holdings was down 1.6 per cent.
“Today's selling seems a bit overdone so it is likely that those who expected that the Nikkei futures would settle higher are selling these large Nikkei components on disappointment,” said Naoki Fujiwara, a fund manager at Shinkin Asset Management.
Traders also noted that US-China trade tensions are expected to drag on, pulling down cyclical stocks such as tech and machinery makers. Tokyo Electron plunged 4.9 per cent, TDK Corp shed 2.6 per cent and Fanuc Corp declined 3 per cent.
On Thursday, US Commerce Secretary Wilbur Ross told Bloomberg TV that China will need to do more than what it has promised so far to ease trade tensions.
“The market is really sensitive to headlines now. It can lose 100 or 200 points on a single headline and can retrieve the same amount on an other headline,” said Shoji Hirakawa, chief global strategist at Tokai Tokyo Research Institute.
Foreign investors sold a net ¥600.1 billion ($5.29 billion) worth of Japanese cash stocks in the first week of December, marking a fourth straight week of selling, data from Japan Exchange Group showed. The figure was the second biggest of this year.
Traders also noted that sentiment soured after the Bank of Japan's tankan survey showed that large Japanese manufacturers' sentiment index for the outlook worsened for the first time in three quarters. They added that concerns about the US-China trade tensions and the outlook for the US economy as well as a slowdown in China demand are likely to linger.
Japan Display Inc jumped as much as 46 per cent after the company said that it is in talks with outside parties, including Chinese companies about alliances, though nothing has been decided. The broader Topix dropped 1.5 per cent to 1,592.55.