Nikkei extends losses after sharp weekly drop

* Nikkei technically oversold, but stronger yen weighs

* Worry about European, Chinese economy feeds pessimism

TOKYO, May 24 (BestGrowthStock) – Japan’s Nikkei average fell 0.8
percent on Monday to its lowest since early December, extending
losses after a sharp drop last week, hit by a strengthening in
the yen and market pessimism about global economic growth.

The fall contrasts with U.S. stocks (Read more about the stock market today. ) which snapped a three-day
losing streak on Friday. [.N]

Tokyo analysts said worries about the debt crisis in the euro
zone that have led to a stronger yen remained and that concern
was shifting to the impact on global economic growth as a whole.

“There’s a lot of pessimism spreading in the market,” said
Hiroaki Osakabe, a fund manager at Chibagin Asset Management.

“There’s the euro troubles, of course, but there’s also
concern about China’s economy (Read more about the fastest growing economy.) — and a growing sense that the
economic recovery may already have peaked out.”

The benchmark Nikkei (.N225: ) shed 62.56 points to 9,718.77.
It fell 6.5 percent last week, its biggest weekly drop since
January 2009. The broader Topix (.TOPX: ) lost 0.5 percent to
875.31.

Technical indicators suggest the Nikkei is oversold, but
continuing uncertainty, particularly about moves in the currency
market, will inhibit gains, market players said.

“The euro zone problems haven’t been cleaned up yet and even
though the global economy is definitely showing more signs of
recovery than it did six months ago, worry continues that the
euro zone’s woes will put a brake on this growth,” said Nagayuki
Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley
Securities.

The Nikkei’s relative strength index (RSI) has fallen to 27,
its lowest since late November. Anything below 30 is considered
oversold.

Market players said support for the Nikkei lies around 9,500
but that should the benchmark break below this, the next target
will be its November low at 9,076, which is also around the same
level of a 50 percent retracement of its 2009-2010 rebound.

Exporters lost ground, with Canon Inc (7751.T: ) down 0.8
percent to 3,695 yen and chip tester maker Advantest Corp
(6857.T: ) down 1.6 percent to 2,034 yen.

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(Reporting by Elaine Lies; Editing by Edwina Gibbs)

Nikkei extends losses after sharp weekly drop