Tokyo stocks slip by break amid China fears

Tokyo stocks slipped 0.10 percent Tuesday morning, following US markets lower as investors kept a wary eye on China after weak manufacturing data reignited concerns about the world's number two economy.

The Nikkei 225 index at the Tokyo Stock Exchange fell 21.17 points to 20,526.94 by the break, while the broader Topix of all first-section shares edged down 0.04 percent, or 0.71 points, to 1,658.89.

"The decline in US shares overnight was behind today's selling sentiment here," said Toshikazu Horiuchi, a broker at IwaiCosmo Securities.

On Monday, Wall Street fell with petroleum-linked equities retreating on a big drop in oil prices.

The Dow Jones Industrial Average declined 0.52 percent, while the broad-based S&P 500 shed 0.28 percent.

"The two negative factors for Japanese stocks today are the concerns over China and cheaper US stocks caused by falling commodity prices," Toshihiko Matsuno, chief strategist at SMBC Friend Securities, told Bloomberg News.

A key gauge of Chinese manufacturing activity plunged to a two-year low in July, according to figures published Monday, suggesting the world's second-largest economy is struggling.

But "domestic earnings will act as a support" today, Matsuno said.

More than 90 companies listed on the Topix report release quarterly results Tuesday, including auto giant Toyota.

Among firms that have already reported, 61 percent exceeded profit expectations, an improvement from the 48 percent that beat forecasts in the previous quarter, according to data compiled by Bloomberg.

US data on Monday showed slightly weaker manufacturing activity and a modest gain in consumer spending.

Investors are now focused on Friday's jobs report for July as they look for clues about the timing of a Federal Reserve interest rate hike.

"Investors are still cautious about trading in Shanghai," Horiuchi said.

"Japanese shares are sensitive to moves in Chinese stocks right now."

Mainland shares were slightly higher on Tuesday morning, stabilising from falls the previous day on worries over a slowdown in China's economy.

In Tokyo trade, Toyota fell 1.09 percent to 8,110 yen by the break, rival Honda slipped 0.10 percent to 4,324 yen, while heavily weighted Fast Retailing, operator of Uniqlo clothing stores, rose 1.30 percent to 61,530 yen.

In Tokyo forex trade, the dollar was at 124.06 yen, slightly up from 123.99 yen in New York late Monday.

si/pb/jom