Nikkei Dives After Bank of Japan Sees Downside Risks to Economy

The major stock indexes in Asia are trading mostly higher with the exception being Japan’s Nikkei, which is trading lower in reaction to dovish comments from the Bank of Japan. The catalyst behind the price gains is the strong performance in the U.S. equity indexes on Thursday. Mainland Chinese markets are higher, but investors are cautious due to renewed tensions over US-China trade relations. In Australia, the banking sector is underpinning the broad index.

At 0416 GMT, Japan’s Nikkei 225 Index is trading 19964.85, down 112.77 or -0.56%. China’s Shanghai Index is at 2486.90, up 3.82 or +0.15% and Australia’s S&P/ASX 200 Index is trading 5624.40, up 27.20 or +0.49%.

U.S. stocks traded higher for a second day after rebounding from a huge intraday loss. At its lows of the day, the benchmark S&P 500 Index was down as much as 2.8 percent before settling 0.86 percent higher. The blue chip Dow Jones Industrial Average recovered from an intraday setback of 611 points before closing 260.37 points better. The tech-based NASDAQ Composite dropped 3.3 percent before turning around and posting a 0.40 percent increase.

Renewed Concerns Over China

Traders said the early pressure in the U.S. stock markets was driven by renewed tensions between the United States and China. A news report triggered the wave of fresh selling pressure. Reuters reported, citing three sources familiar with the situation, that U.S. President Trump is considering an executive order to ban American companies from using telecommunications equipment made by China’s Huawei and ZTE. This raised concerns over whether the two economic superpowers can reach a trade agreement before the March 1 self-imposed deadline.

Later in the day, the British newspaper The Times also reported that Britain’s defense minister said he has “grave, very deep concerns about Huawei providing the 5G network in Britain.”

Nikkei Pressured by BOJ’s Dovish Remarks

Early Friday, the Bank of Japan released its summary of opinions from its December monetary policy meeting, where it noted the “heightening” of downside risks to economic activity.

“Regarding the outlook for the global economy, risks have been tilted to the downside on the whole amid heightening uncertainties and a prevailing view that such situation will be protracted,” said the note from the BOJ.