Nikkei falls 3 pct to 2-mth low on Europe debt woes

By Elaine Lies

TOKYO (BestGrowthStock) – Japan’s Nikkei average slid 3.3 percent to a two-month closing low on Thursday, catching up with falls in other markets after a string of holidays in Japan, as more signs emerged that the fallout from the Greek debt crisis may spread to bigger European economies.

In the benchmark’s biggest one-day percentage loss since March 2009, exporters such as Canon Inc (7751.T: ) took a beating after the euro hit a two-month low against the yen below 120 yen the previous day. Resource-linked shares tumbled after metals prices sank to multi-month lows.

The 110 billion euros ($143 billion) bailout of Greece unveiled over the weekend failed to dissipate concerns the crisis could spread to other countries such as Spain and Portugal, whose credit ratings were downgraded last week.

“There’s definitely the sense that the troubles in Greece may be spreading through southern Europe, and this sent investors who had become a bit too optimistic out of the market,” said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.

“But fundamentally the global economy is improving, with the pace of recovery starting to show signs of picking up in some of the developed economies, so falls are likely to be checked by short-covering.”

The benchmark Nikkei (.N225: ) fell 361.71 points to 10,695.69, while the broader Topix (.TOPX: ) fell 3.1 percent to 956.72.

Market players said technical charts indicate initial support could come at the Nikkei’s 75-day moving average around 10,668 and then at its 100-day moving average just under 10,600.

Just above the 10,600 level is the Nikkei’s 50 percent retracement from an early February low just under 9,900 to an 18-month high of 11,408.17 in early April.

“This adjustment period may continue for a little bit longer, but macro and micro fundamentals both in Japan and the United States are clearly on an uptrend, likely helping slow falls in markets,” said Tsuyoshi Segawa, an equity strategist at Mizuho Securities.

Japan’s financial markets were closed May 3-5 for “Golden Week” holidays. During that time, the Dow Jones industrial average (.DJI: ) shed 1.3 percent and the pan-European FTSEurofirst 300 (.FTEU3: ) index of top shares lost nearly 4 percent.

MATERIALS TUMBLE, EXPORTERS HIT

Trade was active, with 2.6 billion shares changing hands on the Tokyo exchange’s first section, the highest volume in nearly two months. Declining shares outnumbered advancing ones by more than 11 to 1.

Mitsui & Co (8031.T: ) and other trading firms tumbled over 5 percent after prices of industrial metals fell to multi-month lows on Wednesday, and after Australia proposed a 40 percent tax on resource profits as part of major tax reform.

The Nikkei business daily also reported on Tuesday that Mitsui & Co plans to invest about 1.2 trillion yen over two years from 2010/11, mostly in energy and infrastructure operations overseas.

Mitsui & Co lost 5.7 percent to 1,346 yen, Mitsubishi Corp (8058.T: ) shed 5.4 percent to 2,123 yen and Itochu Corp (8001.T: ) fell 5.2 percent to 779 yen.

Ferronickel manufacturer Pacific Metals (5541.T: ) gave up 6.5 percent to 735 yen and smelter Dowa Holdings (5714.T: ) lost 4.8 percent to 501 yen.

Exporters fell, with digital camera maker Canon losing 3.1 percent to 4,220 yen and chip-tester maker Advantest Corp (6857.T: ) falling 4.6 percent to 2,339 yen.

Automaker Honda Motor Co (7267.T: ) skidded 3.3 percent to 3,110 yen.

But there were a few gainers.

Showa Shell Sekiyu (5002.T: ) rose 2.2 percent to 655 yen, becoming the biggest gainer on the Nikkei 225, after Citigroup hiked its rating on the company to “hold” from “sell”, citing improving refining margins.

Shares of Unicharm Petcare Corp (2059.T: )jumped 21.7 percent to 3,810 yen after Unicharm Corp (8113.T: ) said it would spend 65.7 billion yen to buy the 63 percent it does not already own in the pet food maker in a tender offer at 3,825 yen per share.

Stock Market Report

(Additional reporting by Aiko Hayashi; Editing by Edwina Gibbs)

Nikkei falls 3 pct to 2-mth low on Europe debt woes