Asian stocks finished yesterday on the back foot, following Wall Street lower as fears of a trade war between the US and China hit market sentiment.
China led the declines, with the main Shanghai Composite index down more than 1 percentage point heading into the final hour of trade.
In Tokyo, the benchmark Nikkei 225 slipped 0.45 percent or 96.29 points to 21,292.29, paring early losses.
Markets in Seoul and Hong Kong were also weaker, with New Zealand the only regional exchange in the green.
However, the losses were not as bad as first feared at the open, with stocks across the region clawing back ground later in the session.
“The impact from the US market turned out not to be so bad as to incite terror here” thanks to lingering hopes that tensions might ease in the weeks to come, Tokai Tokyo Research Institute market analyst Makoto Sengoku said.
However, traders were spooked by Chinese retaliatory action on trade with the US, as Beijing on Monday slapped tariffs on 128 US imports worth US$3 billion, including fruit and pork.
In addition to that move, US President Donald Trump again threatened to tear up the North American Free Trade Agreement, tweeting that Mexico was doing too little to counter illegal immigration into the US.
Investors also took their cue from US markets, which tumbled on the first trading session back after the Easter holiday, both on trade fears and a bearish turn for tech stocks.
The Dow Jones Industrial Average closed 1.9 percent lower while the broad-based S&P 500 shed 2.2 percent.
However, it was tech stocks that led the declines, with the NASDAQ Composite dropping 2.7 percent.
Giants Amazon.com Inc, Facebook Inc and Tesla Motors Inc suffered the largest drops, but the negative feeling infected the broader market.
Amazon sank 5.2 percent after a series of attacks by Trump in which he accused the retailer of profiteering at the expense of the US Postal Service.
“It started with the tech stocks and it’s become ‘throw the baby out with the bathwater,’” said J.J. Kinahan, chief market strategist at TD Ameritrade.
“They’re reassessing the valuation on the entire market,” Kinahan said. “A while ago all news was good news. Now [the] news is all things to be afraid of.”
With sentiment souring, the safe-haven yen strengthened earlier in the trading days before also falling back as equities pared losses.
The greenback was changing hands at ￥105.95 yesterday afternoon against ￥106.29 a day earlier.
Against the unsettling background, “the yen has re-emerged as the weapon of choice,” National Australia Bank director of economics David de Garis said.
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