Japanese stocks hit 7-month low as U.S.-China tensions rise

* Nikkei, Topix hit lowest level since early January
* U.S.-China confrontation seen hurting exporters
* Transport equipment makers hit 3-year low
* Suntory, Subaru shine on strong earnings

By Hideyuki Sano
TOKYO, Aug 6 (Reuters) - Japanese shares plummeted on
Tuesday to their lowest since early January, spooked by the
spectre of a full-blown economic war between the United States
and China after Washington designated China a currency
manipulator.
Although the market pared more than half of its earlier
losses, helped in part as the Chinese yuan steadied, sentiment
remained cautious on heightening uncertainties over the global
economic outlook.
The Nikkei share average .N225 fell 0.65% to 20,585.31,
after diving 2.94% at one point and hitting its lowest since
Jan. 10. The broader Topix .TOPX lost 0.44% to 1,499.23.
"Trend-followers are boosting their short positions on the
Nikkei futures. The Nikkei could fall another 800 points, with
19,000-19,500 increasingly seen as a target," said Masanari
Takada, cross asset strategist at Nomura Securities.
A yearlong U.S.-China trade war took a sharp turn for the
worse as Washington accused Beijing of manipulating its currency
after China let the yuan drop to its lowest point in more than a
decade. Companies with exposure to global trade were badly hit as
the yen has risen, hitting a seven-month high against the dollar
JPY= and 33-month high on a trade-weighted basis JPYEEXN1=J .
Toyota Motor 7203.T and Softbank Group 9984.T , Japan's
two biggest firms by market cap with global presence, fell 2.4%
and 2.9%, respectively.
Panasonic 6752.T slumped 2.0%, having lost as much as 4.2%
to hit 3-1/2-year lows while Honda Motor 7267.T dipped 0.2%,
hitting three-year lows.
The transport equipment maker index .ITEQP.T fell 0.8%,
shedding as much as 3.3% to hit a three-year low.
Sharp falls in the market prompted buybacks in some of the
most battered shares.
Steelmaker shares .ISTEL.T , one of the early victims of
U.S. President Donald Trump's trade war, hit near seven-year
lows before bouncing back 1.2% while brokerage shares .ISECU.T
also rose 1.2%, erasing earlier falls to three-year lows.
Suzuki Motor 7269.T ended up 0.3%, recovering from an
earlier fall of more than 10%, after the automaker posted
disappointing quarterly earnings results due to a slowdown in
India, the most important growth market for the firm. The shares
have lost about half of their value from a record peak hit
almost a year ago.
On the other hand, there were pockets of brightness in some
earnings results.
Suntory Beverage & Food 2587.T rose 5.1% after its
April-June profits beat market expectations.
Subaru 7270.T spurted 8.1% higher following its brisk
earnings results.
Trading turnover surged to 2.637 trillion yen, more than 30%
above the average over the past month.
The Nikkei volatility index .JNIV rose to 26.41, also the
highest since early January, before easing to 22.98.

(Editing by Jacqueline Wong)