May 16, 2018 / 2:58 AM / 4 days ago

Nikkei falls as US yield spike, North Korea worries weigh; MUFG tumbles

TOKYO, May 16 (Reuters) - Japanese stocks edged lower on Wednesday morning as sentiment was knocked by a surge in U.S. Treasury yields to seven-year highs and after Pyongyang called off talks with Seoul, throwing a major U.S.-North Korean summit into question.

Data earlier showing the world’s third-biggest economy suffered a deeper-than-expected contraction in the first-quarter also checked buyers.

The Nikkei declined 0.3 percent to 22,747.92 in midmorning trade, with the banking sector underperforming, falling 1.2 percent.

Japan’s economy contracted a more than expected 0.6 percent in the January-March period on an annualised basis, putting an end to eight straight quarters of expansion.

In the U.S. market overnight, the yield on 10-year U.S. Treasury notes jumped to its highest level since July 2011, driven by upbeat consumer spending and factory data.

“Overseas stocks are weaker, yields are higher while gold prices were lower... very unstable moves, and these price moves are making investors risk-averse,” said Yoshinori Shigemi, global markets strategist JP Morgan Asset Management. Investors were also cautious about developments on the Korean peninsula, after North Korea cancelled high-level talks with Seoul, denouncing military exercises between South Korea and the United States.

That has raised doubts about the planned summit between U.S. President Donald Trump and his North Korean counterpart leader Kim Jong Un scheduled next month

Wednesday’s big losers included Mitsubishi UFJ Financial Group, which slumped more than 5 percent after the bank’s annual net profit missed analyst estimates and on disappointment over the size of a share buyback plan.

Suruga Bank, whose shares have fallen 45 percent this year on worries about its loans to retail investors for property investments, tumbled 10 percent after the bank said that many employees knew about improper lending.

Metal shares were lower after gold shed 1.7 percent and hit the lowest this year at $1,288.31 in the previous session, before edging up in Asian trade.

Sumitomo Metal Mining shed 2.2 percent.

The broader Topix dropped 0.2 percent to 1,801.62. (Editing by Shri Navaratnam)

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