Nikkei closes at 6-month low on Europe debt worry

By Elaine Lies

TOKYO (BestGrowthStock) – Japan’s Nikkei average fell to a six-month closing low on Wednesday as investors worried about whether Europe can tackle its debt woes after Fitch Ratings said Britain faced a “formidable” fiscal challenge.

But the benchmark finished above a key support level and pared losses after a Reuters report quoting sources as saying a senior Chinese official told an internal investor conference that exports in May grew about 50 percent from a year earlier, up from 30.5 percent in April.

Honda Motor (7267.T: ), which has just settled one strike in China, lost 2.8 percent as another strike at a supplier there moved into its third day, prompting the carmaker to suspend production at two local car plants.

The Nikkei managed to eke out a close above a key support line just under 9,400 after dipping briefly below it in midafternoon trade.

“There’s still a lot of uncertainty about the future, a lot of investors closing out positions due to risk avoidance,” said Hiroaki Osakabe, a fund manager at Chibagin Asset Management.

“Without buying at the lows by pension funds the way we saw yesterday, the market will be prone to slides,” he added, noting talk in the market of selling by European institutional investors.

In moderate trade, the benchmark Nikkei (.N225: ) fell 1 percent to 9,439.13, its lowest close since late November. It dipped as low as 9,378.23 on what some in the market said was selling linked to the settlement of Nikkei futures and options on Friday.

The Nikkei’s relative strength index fell to around 33, with 30 and below considered oversold, and its MACD, which signals trend changes, was poised for a bearish cross.

The broader Topix (.TOPX: ) lost 0.9 percent to 850.37.

European shares fell on Tuesday, hitting a near two-week closing low, after Fitch said Britain faced a “formidable” challenge to cut government borrowing and needs more ambitious plans to reduce the deficit over the medium term. (.EU: )

Some in the market said there was also concern about Bulgaria after European Commission Economic and Monetary Affairs Commissioner Olli Rehn said the commission was concerned about the quality of Bulgarian statistics and wanted to send a mission there when EU statistics office Eurostat gets new auditing powers.

“Worries about Europe’s finance problems remain strong, and these issues are perceived as a risk factor that could lead to a strong yen,” said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities.

The euro slipped 0.5 percent from late U.S. levels to 109.05 yen after gaining 0.5 percent on Tuesday.

Many Japanese exporters have set their currency assumption rates for the euro at around 120-125 yen for the year to March, and investors fret about a stronger yen as it eats into exporters’ profits when repatriated.

BLUE CHIPS, HONDA SLIDE

Chibagin Asset’s Osakabe said jitters about U.S. jobs data, which appeared to confirm an economic recovery was lagging, had made investors increasingly sensitive to macroeconomic data from Europe and China as they sought clues to the health of the recovery.

The senior Chinese official also reportedly told the conference that Chinese consumer prices rose 3.1 percent in May from a year earlier.

But a wide range of Japanese stocks fell, with blue chips leading the slide, although many had pared their losses in the last minutes of trade.

Canon Inc (7751.T: ) shed 1.8 percent to 3,625 yen and Sony Corp (6758.T: ) slipped 1.7 percent to 2,565 yen.

Honda fell to 2,621 yen, with some market players saying foreign investors were likely selling the stock on worries about the impact of the strike on its earnings.

Shares of SKY Perfect JSAT (9412.T: ), a provider of broadcasting and communications services, climbed 4.4 percent to 33,350 yen after Deutsche Securities raised its rating on the stock to “buy” from “hold” and assigned a 45,000 yen target price.

Trade was moderate on the Tokyo exchange’s first section, with more than 2 billion shares changing hands, the highest volume in a week.

Declining stocks outnumbered advancing ones by more than 2 to 1.

Stock Research

(Editing by Michael Watson)

Nikkei closes at 6-month low on Europe debt worry