Nikkei slips after Wall Street retreats as data signals slow recovery

Japanese shares slipped on Thursday following hefty overnight losses on Wall Street after US data reaffirmed concerns of a slow global economic recovery, though investor hopes of chunky dividends by next week helped limit losses.

Investors sought to limit exposures to downside risks as the global economic outlook darkened on rising Covid-19 infections in Europe as well as on uncertainties over US presidential elections.

Japan's Nikkei share average slipped 0.57 per cent to 23,214.49, falling below a key support from its 25-day average at 23,222.

The broader Topix lost 0.53 per cent to 1,635.46, led by cyclicals such as steelmakers and carmakers .

Steelmakers JFE Holdings and Kobe Steel fell 4.7 per cent and 3.6 per cent, respectively. Among carmakers, Honda lost 2.9 per cent while truck maker Hino Motors shed 2.4 per cent.

Elsewhere, Sumitomo Mitsui Trust dropped 2.8 per cent, hit by concerns about reputational damages after the Japanese company made errors in vote-counting of shareholders' meetings it administers.

Investor caution was palpable with so-called quality stocks, those with steadier earnings outlook, outperforming the overall market, said Yuya Fukue, trader at Rheos Capital Works.

Among the quality stocks, endoscope maker Olympus gained 2.6 per cent while optical products maker Hoya Corp rose 1.7 per cent and Sysmex, a medical equipment firm, added 1.6 per cent.

Still, Nikkei's losses were smaller than the 2.37 per cent drop in US S&P500, partly due to expectations of big reinvestment flows from dividend next week.

"We have 800 billion yen ($7.59 billion) of reinvestment expected. That is big," said Fukue at Rheos.

Shares of start-up companies were another bright spot, with their Mothers Index hitting a 2-1/2-year high.

Internet service firm Toyokumo, listed in the Mothers market on Thursday, was untraded with a glut of "buy" orders.

Toyokumo's strong IPO debut lifted shares of software firm Cybozu, its parent company before a management buyout and its second-biggest shareholder.