Japan stocks snap 8-day winning streak on rates, China worries

Japanese stocks snapped an eight-day winning streak on Thursday, having reversed course after hitting a five-week peak earlier as rising U.S. yields and a slowing Chinese economy sapped momentum from the market's rally.

The Nikkei index closed 0.75% lower at 32,991.08, after hitting a high of 33,322.45 in morning trade. The broader Topix scaled a 33-year high of 2,397.33 in the morning, but closed 0.4% lower at 2,383.38.

The indexes have rallied strongly and are up more than 25% year-to-date, among the best-performing globally.

"Investors have a positive view on Japanese equities," said Kenji Abe, an analyst at Daiwa Securities in Tokyo. "But, we've had some negative news and U.S. yields are higher, turning people a little pragmatic."

On Wednesday, a stronger-than-expected U.S. services survey drove up two-year yields in anticipation of interest rates staying higher for longer.

The higher, risk-free return put pressure on U.S. growth sectors such as technology, which was reflected in Japan and other Asian markets.

Among the biggest losers was Advantest. The computer-chip testing equipment maker fell 6.6%, tracking an overnight drop in customer Nvidia.

Shares of NTN Corp fell 5.4% after the ball-bearings maker issued a zero-coupon convertible bond.

China's August trade data came in better than some had expected, but exports and imports both shrank following a fifth straight month of declining factory activity - a drawback for suppliers in Japan.

The weak yen, which hit a 10-month low of 147.87 to the dollar in morning trade, remains a source of support, however, for Japanese exporters, since it helps them compete globally.

Shipbuilder Mitsui E&S was up 4.2% and has surged this week despite being earmarked for removal from the Nikkei index on low liquidity.

Shares in Mitsubishi Heavy Industries climbed to a 26-1/2-year high following the successful launch of one of its rockets.

Shares in food producer Toho leapt 22% after the company upgraded its earnings forecast. (Reporting by Tom Westbrook in Singapore; Editing by Sherry Jacob-Phillips and Savio D'Souza)