Japanese shares track Wall St drop; banks, automakers lead declines

SYDNEY, April 16 (Reuters) - Japanese shares on Thursday tracked overnight losses on the Wall Street, as economic damage from COVID-19 weighed on investor sentiment, with banks and automakers leading the declines.

The benchmark Nikkei average ended 1.3% lower at 19,290.20. The Nikkei's volatility index, a measure of investors' volatility expectations based on option pricing and considered to be a fear gauge, rose 8.6% to 39.36.

On Wednesday, all three major U.S. stock indexes fell as the raft of weak economic data and dismal first-quarter earnings reports compounded concerns over the extent of damage from the coronavirus pandemic.

U.S. retail sales and manufacturing output saw sharp declines, while disappointing earnings from Bank of America Corp (BAC) and Citigroup Inc (C) added to worries about weak U.S. corporate results.

Taking a cue from this, Tokyo-listed banks fell, with Mitsubishi UFJ Financial Group MUFG Inc, Sumitomo Mitsui Financial Group SMFG Inc and Mizuho Financial Group Inc (MFG) shedding between 2.1% and 3.3%.

The broader Topix fell 0.8% to 1,422.24, with two-thirds of the 33 sector sub-indexes on the Tokyo exchange finishing lower.

Highly cyclical sea transport, transport equipment and non-ferrous metals were the worst three performing indexes on the main bourse.

"We have downgraded Japan to a neutral from favour, reflecting fuller relative valuations and softer fundamentals in the current global setting," said Natasha Ebtehadj, portfolio manager at Columbia Threadneedle Investments in London.

"Although, still supported by the long-term structural improvement story of better corporate governance, Japan is a strongly cyclical and operationally leveraged market that is highly exposed to 'sudden stops' in global activity."

Toyota Motor Corp (TM) slid 2.0% after the carmaker said it will cut production of finished vehicles at 18 plants in Japan due to the COVID-19 outbreak.

Nissan Motor Co Ltd (NSANF), Honda Motor Co Ltd (HMC) and Mazda Motor Corp (MZDAF) lost between 3.8% and 5.2%.

JFE Holdings (JFEEF) fell 3.3% on news that its unit JFE Steel will temporarily halt two blast furnaces in western Japan, potentially cutting 25% of its capacity.

Its bigger rival Nippon Steel (NISTF), which announced a similar plan earlier this month, fell 3.1% to hit its lowest level in data going back as far as 1973.

Bucking the overall trend, the Nikkei's heavyweight SoftBank Group Corp (SFTBF) advanced 2.2% after the tech conglomerate said it re-purchased shares worth 16 billion yen ($148 million) in late-March.

The index of Mothers start-up shares climbed 2.7% to 730.88, its highest close since March 5.

($1 = 107.8600 yen) (Reporting by Tomo Uetake; Editing by Ramakrishnan M. And Uttaresh.V)

Copyright © Reuters 2008. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.

News, commentary and research reports are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.