Nikkei falls over 2 percent to 2 month low

By Elaine Lies

TOKYO (BestGrowthStock) – Japan’s Nikkei average dropped 2.7 percent to a two-month low on Monday as the euro’s fall to a four-year trough and slides in overseas shares raised fears the global economy could sustain more damage than expected.

Exporters such as Canon Inc (7751.T: ) slid as the yen climbed, with the dollar falling 0.7 percent to below 92 yen and the euro down 1.3 percent against the Japanese currency.

The euro marked a four-year low against the greenback earlier on Monday as investors worried that harsh spending cuts mandated by a bailout plan may choke off a fragile recovery in the 16-country euro zone.

“Fundamentally, the worry is really that the fiscal situation in the southern European states will hit the European economy, and then the global economy,” said Takashi Ushio, head of the investment strategy division at Marusan Securities.

“This would affect exporters not only in Japan but also China as well, raising fears that Chinese economic growth could cool too. That’s the basic worry today.”

U.S. stocks (Read more about the stock market today. ) fell on Friday on a combination of weak earnings from retailers, Senate backing for limits on credit card fees and concerns over the sustainability of European public debt. (.N: )

The benchmark Nikkei (.N225: ) slipped 284.96 points to 10,177.71 after briefly falling as low as 10.158.30, its lowest since early March, and looked on track for a two-month closing trough. The broader Topix (.TOPX: ) fell 1.5 percent to 922.04.

The Nikkei fell below its 200-day moving average, currently around 10,350, for the first time in over a week, with the next target at 10,000, a key psychological support level.

The Nikkei’s relative strength index (RSI) fell to 35 on Monday. Anything from 30 downwards is considered oversold.

“There’s a lot of nervousness still about the tough fiscal situation in the euro zone, and while Japanese earnings were good there’s a lot of uncertainty about what lies ahead over the next year, especially given the stronger yen,” said Hiroichi Nishi, general manager at the equity division of Nikko Cordial Securities.

Canon Inc (7751.T: ) lost 2.6 percent to 3,940 yen, Sony Corp (6758.T: ) fell 4.2 percent to 2,824 yen and chip tester maker Advantest Corp (6857.T: ) lost 4.3 percent to 2,190 yen.

But NTT (9432.T: ) jumped 3.5 percent to 3,855 yen after Japan’s largest telecom firm said it would cancel all of its 251 million treasury shares, or about 16 percent of shares outstanding, over two years.

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(Reporting by Elaine Lies; Editing by Joseph Radford)

Nikkei falls over 2 percent to 2 month low