Tokyo shares open lower, extending global rout

TOKYO - Tokyo shares opened lower Tuesday, extending a global rout after US and European financial markets fell sharply on worries over plunging Chinese equities and tensions in the Middle East.

Shanghai lost about seven per cent Monday on a poor report on manufacturing activity and as measures introduced to curb China's mid-2015 share slump are about to expire.

Wall Street started 2016 on a dreary note Monday. The Dow shed 1.58 per cent, the S&P 500 was down 1.53 per cent and the Nasdaq fell 2.08 per cent.

"Economic indicators in both China and the US are weak. As they're the world's two biggest economies and the impact is huge, each new data point is keeping stock markets in suspense," Toshihiko Matsuno, chief strategist at SMBC Friend Securities, told Bloomberg News.

"But monetary policy is still accommodating and once markets calm down we'll see money flow into risk assets again." The benchmark Nikkei 225 index at the Tokyo Stock Exchange dropped 0.33 per cent, or 60.49 points, to 18,390.49 in early trade, while the broader Topix index of all first-section shares lost 0.36 per cent, or 5.43 points, to 1,504.24.

In currency trading, the dollar edged down to 119.38 yen (S$1.40) from 119.42 yen Monday in New York.

The drop was driven by investors moving into the yen, which is seen as a safe haven in times of turmoil and uncertainty.

But a strong yen hurts the profitability of Japanese exporters and dents demand for their shares.

The euro fell to $1.0824 (S$1.50) and 129.24 yen from $1.0833 and 129.37 yen in US trade.