Nikkei drifts down but support holds; earnings a boost

By Elaine Lies

TOKYO (BestGrowthStock) – Japan’s Nikkei average slipped 0.3 percent on Friday to mark its third negative week in a row, although support was holding as forecast hikes by companies such as Furukawa Electric (5801.T: ) helped stem further losses.

Honda Motor Co (7267.T: ) rose 1.1 percent following a media report the carmaker’s operating profit for the past financial year will exceed its earlier estimate and after the company said it will launch three hybrid models in China in the next few years.

Short-covering in futures helped the cash market stand up to a slew of negative factors, including the yen’s strength against the euro, concern that Greece’s debt woes would dampen risk appetite, and China’s recent moves to curb property speculation, which have hit Chinese shares.

But market players said it was still too early to say if the Nikkei was ready to resume its earlier uptrend that saw it hit an 18-month intraday high of 11,408.17 in early April.

“Compared to the first week of April, there’s a lot more uncertainty, so sentiment has definitely worsened a bit,” said Hideyuki Ishiguro, strategist at Okasan Securities.

“While it does appear that Greece will be supported, the problems are leaving a poor impression, and there’s also concern over China and whether there will be more government moves.”

The benchmark Nikkei (.N225: ) shed 34.63 points to 10,914.46 after earlier falling as low as 10,865.92, a loss of 0.8 percent. It fell 1.7 percent on the week for its third week of losses.

The broader Topix (.TOPX: ) was flat at 978.20.

The Nikkei appeared trapped below resistance at the level of its 25-day moving average, currently around 11,080.

But support was holding at about 10,800, just under the 38.2 percent retracement for of a two-month rally that started in early February and pushed the Nikkei up to an 18-month peak of 11,408.17 in early April.

Below that, a 50 percent retracement of that same rise lies roughly around 10,650, just under the Nikkei’s 75-day moving average.

“I think this has been a good pullback for the market although it’s hard to tell when it will end,” said Kiyoshi Noda, chief fund manager at MU Investments.

Ishiguro said it appeared that large-lot orders for Nikkei futures had been placed from 10,850-10,870 and were currently providing support, although it was unclear who the players were.

The Nikkei has been flung around the last few days by active trading in futures. Europeans have been said to be particularly active, but Ishiguro said the recent moves did not appear to be connected to any sort of hedging maneuver.

EARNINGS INTEREST

With Japan’s corporate earnings season moving into high gear next week, investors were sensitive to any news involving results.

Furukawa Electric Co Ltd rose 1.3 percent to 471 yen after hiking its operating profit estimate to 19.5 billion yen from 15 billion yen, citing growth across a broad range of products including semiconductors and electronics.

Electronics conglomerate Toshiba Corp (6502.T: ) rose 0.2 percent to 532 yen after saying it would beat its operating profit estimate for the financial year just ended by 17 percent.

It said it expected to post 117 billion yen, above a consensus of 103.8 billion yen in a poll of 21 analysts by Thomson Reuters I/B/E/S.

But tech exporters lost ground as the euro tumbled to a one-year low on worries that Greece could be heading for default, though it later recovered slightly.

Kyocera (6971.T: ) lost 1.3 percent, Tokyo Electron (8035.T: ) also dropped 1.3 percent to 6,280 yen and TDK Corp (6762.T: ) fell 1.5 percent to 6,070 yen.

And shares of Hirose Electric Co (6806.T: ) and other suppliers of components to Nokia (NOK1V.HE: ) fell after the world’s top cellphone maker cut its profit outlook and delayed the launch of models to challenge the iPhone and Blackberry.

Hirose, which counts Nokia as its largest customer for mobile phone connectors, fell 2.2 percent to 10,220 yen.

Among other suppliers, Murata Manufacturing Co (6981.OS: ) dropped 1.9 percent to 5,270 yen and Nissha Printing Co (7915.T: ) fell 4.0 percent to 3,360 yen.

Volume was moderate with 2.0 billion shares changing hands on the Tokyo exchange’s first section. Advancing shares outnumbered declining ones by 1.7 to 1.

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(Additional reporting by Masayuki Kitano; Editing by Joseph Radford)

Nikkei drifts down but support holds; earnings a boost