February 6, 2020 / 7:56 AM / 16 days ago

China's U.S. imports tariff cuts propel Japan shares to best day in 13 months

* China says to halve some tariffs on U.S. imports

* Nikkei leaps 2.4%, Topix up 2.1%

* Trade turnover tops 3 trln yen, highest in 2 months

* Earnings season in full swing in Japan

By Tomo Uetake

TOKYO, Feb 6 (Reuters) - Japanese shares posted their biggest one-day gain in more than a year on Thursday as investor sentiment was buoyed after China cut tariffs on some imported goods from the United States, lifting some of the gloom from a fast-spreading virus outbreak.

The benchmark Nikkei average jumped 2.4%, its most since late December 2018, to a two-week closing high of 23,873.59.

The broader Topix advanced 2.1% to 1,736.98, also marking its best day in 13 months. Turnover on the main board hit 3.05 trillion yen ($27.7 billion), the highest since Dec. 13.

“Although buying in index futures was the main driver of today’s market, more than 3 trillion yen worth of turnover (in cash equities) implies some real buying was also happening,” said Takeo Kamai, head of executions services at CLSA in Tokyo.

“The key here is whether we can clear the iron ceilings — 24,000 in the Nikkei and 110 yen in the dollar/yen. If we break above those levels, we are likely to see more full-fledged buying from investors.”

All of the 33 sector subindexes on the Tokyo Stock Exchange were in positive territory, led by cyclical sectors. Insurance , oil and coal products and precision machinery were the top three performing subindexes.

Stocks extended earlier gains after China said it will halve tariffs on some U.S. goods from Feb. 14, corresponding with U.S. pledges to cut levies on some Chinese goods after the two sides reached a partial trade deal early last month.

The announcement was seen by analysts as a move by Beijing to boost confidence amid the coronavirus outbreak that has disrupted much of its economy and is increasingly rippling through global supply chains.

“Under the phase 1 deal, China has to meet a tough target to increase U.S. imports by $100 billion this year, so a measure like this was necessary and expected,” said Tomo-o Kinoshita, global market strategist at Invesco Asset Management.

“But at the same time, that they did this now points to their desire to support Chinese companies as the coronavirus epidemic will obviously deal a huge blow to China’s growth.”

China said it hopes to work with the United States to eliminate all tariff increases in future.

Overnight, the S&P 500 climbed 1.1% to a record close and the Nasdaq Composite added 0.4% to an all-time peak, while the Dow advanced 1.7%, following an upbeat ADP private sector jobs report and ISM’s non-manufacturing index.

The greenback hit a two-week high of 109.985 yen, providing a tailwind for Japanese exporters, as a weaker local currency boosts corporate profits when they are repatriated.

With the earnings season in full swing in Japan, Toyota Motor Corp rose 2.6% after the country’s biggest automaker raised its forecast for annual operating profit by 4.2%, citing favourable currency rates and better-than-expected vehicle sales.

Pan Pacific International Holdings Corp soared 17.7% after the discounter Don Quijote’s parent raised its operating profit forecast for the year ending June.

Z Holdings Corp surged 6.0% after the internet services firm reported a net profit of 75.1 billion yen for the April-December period, up 7% from a year earlier, due to its consolidated subsidiary of ZoZo.

Bucking the overall firmness, DeNA Co Ltd dived 9.7% after the mobile partner of Nintendo booked a 49.4 billion yen writedown as its gaming business falters in Japan’s saturated mobile market.

Although the financial markets found some comfort, traders admitted concerns about the coronavirus outbreak and its broader impact on individual companies and the economy.

The death toll in mainland China jumped by 73 to 563 as experts intensified efforts to find a vaccine for the disease that has shut down Chinese cities and forced thousands more into quarantine around the world.

Drugmakers and the World Health Organization played down reports about progress towards finding treatments, which had boosted traders’ confidence.

$1 = 109.9400 yen Additional reporting by Hideyuki Sano; Editing by Sherry Jacob-Phillips and Subhranshu Sahu

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