TOKYO: Japan's Nikkei fell on Monday morning as budding hopes of a resolution to the US-China trade war faded, while shares of index-heavy Fast Retailing tumbled after dismal monthly sales data. The Nikkei share average dropped 1.6 per cent to 21,898.99, pulling back from a two-week high on Friday when investors cheered signs that Beijing and Washington were seeking to resolve their trade row. Those hopes were dashed after White House economic adviser Larry Kudlow, speaking on CNBC, contradicted a report earlier in the day that had suggested the White House was taking steps to work out a deal. Analysts said that weakness in Chinese shares is also dimming the mood, while investors were generally cautious ahead of US congressional midterm elections on Tuesday. "Depending on the result of the midterm elections, the market can be volatile so investors are not taking large positions," said Hiroyuki Fukunaga, chief executive of Investrust. Opinion polls show strong chances that Democrats may win control of the House of Representatives in the elections after two years of wielding no practical political power in Washington, with President Donald Trump's Republican Party likely to keep the Senate. Fast Retailing tumbled 4.8 per cent and sliced more than 105 points off the Nikkei benchmark index, after the operator of Uniqlo clothing said its October domestic same-store sales dropped 10 per cent on the year hit by weak winter clothes sales on unseasonably warm weather. Hitachi Chemical Co dived 7 per cent after the company on Friday said it found improper tests were conducted on nearly 30 more products, accounting for about a tenth of revenues. Subaru Corp fell 5 per cent after the Nikkei business daily reported that the automaker may cut its full-year forecast when it releases its first-half earnings on Monday.

The company said it will delay the timing to announce its results to 0600 GMT from an initially planed 0400 GMT. Electric components makers lost ground, with TDK Corp tumbling 4.3 per cent and Murata Manufacturing sliding 1.8 per cent. The broader Topix dropped 1.1 per cent to 1,640.39.