Nikkei falls on soft Asian shares, yen helps exporters
Japan's Nikkei share average slipped on Wednesday, failing to maintain early gains as falls in other Asian markets offset guarded economic optimism after some firm U.S. corporate earnings.
Although a small number of exporter shares were bought back from lows on relief the yen retreated from Monday's one-month high against the dollar, futures selling helped to push down shares in most sectors.
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Selling in Nikkei futures accelerated after Shanghai shares slipped to fresh six-month lows, though they recovered losses after the Tokyo market close.
The broader Topix fell 0.4 percent to 740.46, marking its ninth straight day of decline, longest such period since June-July 2009.
"The fact that all Asian shares were not tracking gains in U.S. shares overnight could suggest that some Asian investors perhaps took some risk-off actions," said Ayako Sera, senior market economist at Sumitomo Mitsui Trust Bank.
The Nikkei share average fell 0.3 percent to 8,726.74
Although it made small gains in early trade following gains in U.S. shares, the Nikkei failed even to test its 25-day moving average at 8,811, a key chart level.
"We need a break above the 25-day average here. It is a race against time, as the average looks set to rise further in coming days. If the Nikkei stumbles, it could slip back again," said Eiji Kinouchi, chief technical analyst at Daiwa Securities.
Comments from U.S. Federal Reserve Chairman Ben Bernanke on Tuesday were not clear-cut enough to add any impetus with investors cautious ahead of Japan's earnings season, which gets into full swing next week.
BETTER THAN OTHERS?
According to Thomson Reuters Datastream, Japanese companies are forecast to post an average 72 percent year-on-year rise in earnings in 2012 after an expected 23 percent decline last year.
That compared with a forecast of an average 7.6 percent rise in 2012 earnings for U.S. S&P 500 companies and a 2.6 percent increase in earnings for STOXX Europe 600 firms.
Still, fears that the global slowdown could be equally damaging for Japanese companies' profits have caused investors to give major exporters the cold shoulder and focus on domestically oriented stocks since the beginning of June.
One of those was Rakuten Inc, which rose 2.9 percent after the Nikkei business daily reported its half-year operating profit for January-July had jumped 20 percent on the year to a record 36 billion yen.
But some market players are worried that defensives are becoming expensive.
"Everyone wants to buy those rock-solid shares with great profits and immunity to the currency shifts," said Ryota Sakagami, chief strategist of equity research at SMBC Nikko Securities.
"However, I think that approach is reaching its limit as the popular defensives will soon be overheated while the riskier assets will be undervalued," said Ryota Sakagami, chief equity strategist at SMBC Nikko Securities.
The yen's retreat prompted short-covering in some exporters on Wednesday.
Sharp <6753.T> rose 0.6 percent, though that came after it tumbled 5.7 percent to a 34-year low on Tuesday. Similarly Panasonic <6752.T> also regained 0.2 percent on Wednesday after slipping 3.6 percent the previous day, due to a strong yen and warnings from U.S. tech firms that dwindling demand in Europe has hit revenue harder than they expected.
The electronics sector remained one of the worst performers, with the Tokyo Stock Exchange's electronic machine subindex <.IELEC.T> having fallen 8.0 percent so far this month, versus the Nikkei's fall of 3.1 percent.
Power companies also extended losses on nuclear safety concerns, with Kansai Electric Power shedding 6.3 percent on top of Tuesday's 7.2 percent drop after geological investigations into the area around its Ohi power plant found it may be on top of an active fault line.
Hokuriku Electric Power <9505.T> was the biggest loser on the main board, dropping 21.4 percent after reports that a fault line was found right under its nuclear power plant, which may need to be abandoned.
Activity was fairly subdued with about 1.60 billion shares changing hands, about 20 percent below the average volume so far this year, and more or less in line with the average so far this month.
On the main board, only 371 shares gained while 1,166 shares fell.