Nikkei down on China worry

By Elaine Lies and Aiko Hayashi

TOKYO (BestGrowthStock) – Japan’s Nikkei edged lower on Tuesday, weighed as Shanghai shares fell after China said it had no plans to relax tougher property measures anytime soon, but falls were checked by hopes for U.S. earnings later in the day.

Though the market rose in early trade on broad short-covering as traders took heart from Alcoa’s stronger than expected quarterly profit, resistance appeared to be growing around 9,660, roughly the level of the Nikkei’s 25-day moving average.

China’s key stock index fell nearly 2 percent after the government said it would continue to rein in speculation in the country’s red-hot property sector, weighing on shares throughout Asia.

“There’s a lot of Chinese economic indicators coming out later this week, and investors have gotten pretty nervous ahead of the numbers,” said Takashi Ushio, head of the investment strategy division at Marusan Securities.

“But Alcoa’s results were quite good and we have Intel later today, with both of these offering support.”

Intel Corp reports later on Tuesday, and other companies reporting this week include JPMorgan Chase & Co and General Electric Co.

“Although there’s a sense of selling fatigue, investor sentiment is still bearish, and the market is looking for a catalyst. Corporate earnings could be one,” said Naoki Koga, a senior fund manager at Toyota Asset Management.

“Intel’s earnings are a focus because they always illustrate a trend.”

The benchmark Nikkei erased morning gains to edge down 0.1 percent to 9,537.23, while the broader Topix shed 0.4 percent to 854.39.

U.S. stocks (Read more about the stock market today. ) eked out small gains in thin trade on Monday before Alcoa, the largest U.S. aluminum producer, posted a stronger-than-expected second-quarter profit (Read more your timing to make a profit.) and raised its estimate for global aluminum consumption, sending its shares up 3 percent.

Chairman and Chief Executive Klaus Kleinfeld told Wall Street analysts that strong industry fundamentals were expected to drive demand for aluminum in the next 10 years with average growth of 6 percent a year.

But by afternoon U.S. stock futures had given up earlier gains to edge down 0.2 percent.

The Nikkei’s next upward target is around 9,660, its 25-day moving average, which is a proxy for a one-month moving average that is closely watched in Japan. On daily Ichimoku charts, a popular charting method among Japanese traders, its kijun-sen — an indicator of medium-term trends — comes in around 9,671, becoming additional resistance.

The next target after that lies around 10,250, roughly the level of the Nikkei’s June high.

The technical picture is growing increasingly bright, with the Nikkei’s MACD, a measure of market momentum, heading up after a bullish cross.

CHINA BRUISING

Shares with large exposure to China slipped, with Hitachi Construction down 1 percent to 1,717 yen and Komatsu, the world’s second-largest maker of earth-moving equipment, down 1.6 percent to 1,698 yen.

Shanghai copper slipped and London prices extended Monday’s falls on investor worry on the global economy, with trading companies taking a hit as a result.

Itochu Corp shed 1.7 percent to 704 yen and Sumitomo Corp lost 1.3 percent to 932 yen. Mitsui O.S.K. Lines, which rose in morning trade, slipped 1.2 percent to 582 yen.

But a broad range of exporters clung to gains made on morning short-covering, with Canon Inc up 0.3 percent at 3,460 yen and Tokyo Electron up 1.7 percent at 4,910 yen.

Shares of Fast Retailing, the operator of the Uniqlo casual-clothing chain, climbed 1 percent to 12,700 yen after it said it would set up a venture with Bangladeshi microfinance specialist Grameen Bank.

Denso Corp, Japan’s No.1 car parts maker, rose 1.3 percent to 2,658 yen after it announced it would establish an aftermarket sales company in Dubai in November to strengthen its business in the Middle East and North Africa.

Trade picked up, with 1.88 billion shares changing hands on the Tokyo exchange’s first section, the highest in two weeks. Declining shares outpaced advancing ones by more than 3 to 1.

Nikkei down on China worry