June 14, 2018 / 2:31 AM / a year ago

Nikkei drops, risk sentiment hit by hawkish Fed tone, trade war worries

TOKYO, June 14 (Reuters) - Japan’s Nikkei share average dropped on Thursday morning after the U.S. Federal Reserve forecast a slightly faster pace of rate hikes this year, while concern about a U.S.-China trade war also soured sentiment.

The Nikkei fell 0.4 percent to 22,869.16 in mid-morning trade.

As expected, the Fed raised its benchmark overnight lending rate a quarter of a percentage point to a range of 1.75 percent to 2 percent, on the back of strong U.S. economic growth.

It also dropped its longstanding pledge to stimulate the economy “for some time” and signalled it would tolerate inflation above its 2 percent target at least through 2020.

Meanwhile, worries about global trade dented investors’ risk sentiment after news that U.S. President Donald Trump will meet top trade advisers on Thursday to decide whether to activate threatened tariffs on billions of dollars in Chinese goods.

“The Fed’s hawkish tone does not help the market, which is more worried about a global trade war which would have a negative impact for a much longer term,” said Takuya Takahashi, a strategist at Daiwa Securities.

He added that the market is worried about whether China retaliate by imposing tariffs on U.S. imports such as soybeans.

Shares of exporters such as automakers and electronics stocks were sold.

Nissan Motor Co fell 0.7 percent, Hitachi shed 1.1 percent and Panasonic Corp dropped 1.5 percent.

Mining stocks underperformed after oil prices eased, hitting Inpex Corp, which sank 2.0 percent.

Shippers bucked the weakness and soared after the Baltic Dry Index, or freight charges, rose 1.0 percent overnight. Mitsui OSK Lines surged 2.3 percent and Kawasaki Kisen added 1.5 percent.

The broader Topix dropped 0.5 percent to 1,791.66. (Editing by Richard Borsuk)

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