JGBs gain broadly after Nikkei falls on fading trade optimism

Japanese government bond (JGB) prices gained broadly on Thursday after the country's stock benchmark dropped to its 1-1/2-week low on doubts whether the United States and China will be able to reach a preliminary trade deal.

Key 10-year JGB futures rose 0.34 point to 153.12, with a trading volume of 30,812 lots. The 10-year cash JGB yield dropped 2.5 basis points to minus 0.075%.

The two-year JGB yield eased 1 basis point to minus 0.205% and the five-year yield fell 1.5 basis points to minus 0.195%.

Thursday's 1.9 trillion yen ($17.4 billion) 5-year JGB auction attracted solid investor interest. The auction bid-tocover ratio, a gauge of demand, rose to 4.03 from 3.69 at the previous sale last month.

In the super-long zone, the 20-year yield fell 2 basis points to 0.295%, while the 30-year and the 40-year yield dropped 2.5 basis points each to 0.445% and 0.475%, respectively.

Japan's stock benchmark Nikkei average closed at its lowest level in 1-1/2-weeks on

Thursday as optimism that the United States and China will reach a deal to remove tariffs faded.

Meanwhile, Japanese shares retreated to one-week lows on Thursday as doubts over an interim U.S.-China trade deal lifted the safe-haven yen, while Line Corp and Z Holdings surged on news that the Yahoo Japan operator was in merger talks with messaging app firm Line.

The Nikkei share average dropped 0.2% to 23,263.96 by the midday break, its lowest since Nov. 7, and the broader Topix retreated 0.5% to 1,691.98, also a one-week low.

Dashing upbeat expectations about a phase one deal was a Wall Street Journal report that said Sino-U.S. negotiations had "hit a snag" over farm purchases, with Beijing not wanting a deal that looks one-sided in favour of the United States.

In the cautious climate, the safe-haven yen firmed as high as 108.66 overnight and was last quoted at 108.79 against the dollar, weighing on Japanese exporters as a strong local currency hurts corporate profits when they are repatriated.

Export-oriented Nissan

Motor fell 2.2%, Honda Motor shed 1.4%, and Toyota Motor dropped 0.8%.

Z Holdings, which last month changed its name from Yahoo Japan, soared 15.9% after the internet firm said merger discussions were underway with Line Corp.

Shares in Line were untraded with a glut of buy orders, while SoftBank Corp, which owns almost half of Z Holdings, climbed 1.5%.

The merger talks between Z Holdings and Line also put pressure on their competitors, with Rakuten Inc diving 5.5%.

Z Holdings was the most traded stock on the main board, while SoftBank Corp was the third-most, and Rakuten was the sixth-most traded issues on the Topix.

The information and telecom sector rose 0.6% to become the second-best performer among Tokyo's 33 subsector indexes.

Elsewhere, Toshiba Corp jumped 2.4% after the firm reported its highest quarterly profit in two years and said it would buy out three of its listed subsidiaries as the industrial conglomerate moves on from accounting scandals and a management crisis.