Battered Nikkei falls to two-mth low but pares loss

* Nikkei falls to two-month low, pares losses slightly

* RSI indicates benchmark close to oversold level

* 200-day moving average likely to become support-analysts

* Exporters hurt by stronger yen worry as euro under pressure

By Elaine Lies and Aiko Hayashi

TOKYO, May 7 (BestGrowthStock) – Japan’s Nikkei average fell more
than 4 percent to a two-month low on Friday before pulling back
slightly, caught up in a global equity sell-off triggered by
Europe’s debt crisis.

Exporters such as Canon Inc (7751.T: ) fell in active trade as
the euro came under pressure, while shares with heavy exposure to
China such as construction machinery maker Komatsu (6301.T: ) slid
as Shanghai shares (.SSEC: ) lost ground.

Nintendo Co (7974.OS: ) tumbled nearly 8 percent after the game
console maker forecast a second straight year of smaller profits
as sales of its Wii console slow. [ID:nTOE64505P]

U.S. stock exchange officials were investigating whether
erroneous trades caused a sudden slump in share prices that wiped
nearly $1 trillion off U.S. equity values at the peak of the
previous day’s sell-off. [ID:nN06234011] [ID:nN06139251]

“There were a lot of issues in New York, including possible
erroneous trades, that added up to a pretty unpleasant feeling,”
said Koichi Ogawa, chief portfolio manager at Daiwa SB
Investments.

“There’s been a lot of flight from risk over the last few
days and now we’re seeing some short-covering and
bargain-hunting. But it’s hard to tell what will happen until we
see Wall Street tonight.”

The benchmark Nikkei (.N225: ) fell 3.1 percent or 331.10
points to 10,364.59, and has lost 6.3 percent in a
holiday-shortened two-day trading week.

The Nikkei has erased this year’s gains, which just a month
ago took it to an 18-month high, but is above the year’s low of
9,867.39 hit on Feb. 9.

Traders were divided on where the market may go next, with
some mindful of the darkest days of the financial crisis.

“The Greece debt crisis is reminding investors of what
happened after Lehman Brothers’ collapse. A failure by one
financial institution ended up triggering a ripple effect on the
global economy,” said Kazuhiro Takahashi, general manager at
Daiwa Securities Capital Markets.

But others noted increasing technical signals that the Nikkei
may be oversold.

Its relative strength index (RSI) stood at 34, the lowest
since November 2009, with anything from 30 and below in oversold
territory. The Nikkei has also fallen through its lower Bollinger
Band.

The Nikkei managed to close above its 200-day moving average
at just over 10,300 after briefly falling below it, a level that
market players said was likely to become a support.

“People were expecting an adjustment anyway but I think most
of them thought it would stop around 10,600,” said Kenichi
Hirano, operating officer at Tachibana Securities.

“When the economy’s on a recovery track, as it is right now,
it’s hard to imagine the Nikkei staying much below the 200-day
moving average for long. It just isn’t logical.”

WAITING FOR DATA

Investors will now be watching U.S. jobs data as well as a
euro zone summit on the Greek crisis later in the day.
[ID:nN06128710] [ID:nLDE62N12L]

Some in the market said that short-covering could emerge on
Wall Street should the jobs data show signs of economic recovery.
But others said that the murky nature of Thursday’s trading meant
Wall Street moves were extremely hard to predict.

The euro was just under 117 yen (EURJPY=: ), up 2 percent,
after shedding around 10 yen at one point the previous day.
[FRX/]

Digital camera maker Canon lost 3.9 percent to 4,055 yen and
chip-tester maker Advantest Corp (6857.T: ) shed 3.7 percent to
2,252 yen. Kyocera Corp (6971.T: ) dropped 3.9 percent to 8,750 yen
and Honda Motor Co (7267.T: ) fell 2.6 percent to 3,030 yen.

Shanghai shares fell 1.6 percent, off an earlier low after
falling 2.7 percent, with long-standing concerns about government
tightening weighing on the market.

Komatsu lost 2.6 percent to 1,761 yen and shipper Nippon
Yusen (9101.T: ) shed 3.9 percent to 350 yen.

Fast Retailing (9983.T: ) fell about 6 percent to 13,040 yen,
the top drag on the Nikkei 225, after it said same-store sales at
its Uniqlo casual-clothing chain fell 12.4 percent in April from
a year earlier as cool weather hurt sales of spring items.

A hefty 3.1 billion shares traded hands on the Tokyo
exchange’s first section, its heaviest volume in about 4 months,
with declining stocks outnumbering advancing ones by more than 17
to 1.

Investing Advice

(Reporting by Elaine Lies; Editing by Edwina Gibbs)

Battered Nikkei falls to two-mth low but pares loss