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Japan's Nikkei rebounded on Tuesday morning supported by short-covering in index heavyweights, but Apple suppliers fell on worries about slowing demand from China.
The Nikkei share average rose 0.8 per cent to 22,445.98 in midmorning trade, after tumbling 1.8 per cent on Monday to close at its lowest level since August 21.
Traders said that Tuesday's gains were mainly due to a technical rebound, as the Nikkei was trading 5 per cent below its 25-moving average, a sign of an oversold market.
Index-heavyweights such as SoftBank Corp and Fast Retailing rebounded, rising 3.2 per cent and 2.3 per cent, respectively, after they were heavily sold on Monday. Automakers also regained ground, with Toyota Motor rising 0.7 per cent and Honda Motor 1.4 per cent.
Currency manipulation
The overall Japanese market was dented on Monday after the US Treasury secretary called for a clause to deter currency manipulation in US foreign trade pacts with countries, including Japan. While the index rose on Tuesday, traders said concern on trade lingered and Japan's planned sales-tax hike pressured shares linked to personal consumption.
“There may be short-covering to some extent, but it may take a while for the Nikkei to fully recover its drops,” said Naoki Fujiwara, a fund manager at Shinkin Asset Management, adding that the market has not factored in the impact from the tax hike yet.
On Monday, Prime Minister Shinzo Abe had pledged to go ahead with increasing the national sales tax to 10 per cent from 8 per cent next October.
The retail sector, which has faced the double whammy of worries about slowing consumption in Japan and weak China demand, dropped 0.6 per cent to a more than a one-month low. It has fallen the past three days. Department stores underperformed, with Takashimaya Co falling 1.6 per cent and Isetan Mitsukoshi 1.0 per cent.
Cosmetics makers Shiseido Co shed 2.3 per cent and Kose Corp tumbled 4 per cent, while babybottle maker Pigeon Corp stumbled 7.6 per cent. Some of these companies have large exposure to China. The market will watch the September figure for tourists visiting Japan, due after Tuesday's close.
Tuesday's losers included Apple suppliers, with Taiyo Yuden tumbling 4 per cent and Murata Manufacturing Co sliding 1.2 per cent, after Apple Inc shares fell 2.1 per cent on a Goldman Sachs report saying there were multiple signs of rapidly slowing consumer demand in China, which could affect demand for iPhones.
The broader Topix rose 0.5 per cent to 1,683.28.
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