Nikkei hits 3-month closing low on euro zone worry

By Aiko Hayashi

TOKYO (BestGrowthStock) – Japan’s Nikkei average hit a three-month closing low on Thursday, after dropping below 10,000 at one point, as weakness in the euro pushed shares of exporters lower.

But Resona Holdings (8308.T: ), Japan’s fourth-largest bank, climbed on a report that it plans to buy back and retire about $4.4 billion worth of preferred shares held by the government as early as this summer.

Tokyo market players said the direct impact of a German move to ban naked short-selling in some securities was ebbing, though continued concerns about the euro zone led investors to unwind risky assets including stocks.

The ban spooked world financial markets on Wednesday, helping send the euro to a four-year low against the dollar before it rebounded.

“Investors appear to have decided to unwind risky assets and they are now looking for any negative news that would back up that sentiment,” said Soichiro Monji, a chief strategist at Daiwa SB Investments.

“What’s behind this is debt worries in Europe and it’s true that European countries don’t seem to be well coordinated in dealing with the problems. But if we were to see more slides in Tokyo shares, then it would probably be due to other factors such as a tightening of policy in China,” he said.

Naked short selling is when a trader sells short a financial instrument he does not possess, betting that its price will fall, without first borrowing the instrument or confirming if it can be borrowed.

The benchmark Nikkei (.N225: ) shed 1.5 percent to 10,030.31, its lowest finish since February 15. It earlier touched 9,999.59.

The broader Topix (.TOPX: ) fell 1.4 percent to 898.15 yen.

Data showing Japan’s economy grew 1.2 percent in the first quarter, the biggest expansion in three quarters and one buoyed by robust exports to Asia and a stimulus-fueled recovery in consumption, failed to push the Nikkei higher.

“If problems in the eurozone start to hurt overseas economies, then Japan will be affected,” said Yasuo Yamamoto, a senior economist at Mizuho Research Institute.

“We probably won’t see U.S. or Chinese demand go down sharply unless there is a surprise event and investors flee from risk, but it is something to watch out for.”

On Wednesday, the euro rallied from a four-year low against the dollar to notch its biggest one-day gain in more than a year as traders bought on speculation that European monetary officials might support it.

But on Thursday it had slipped back a bit, down 0.6 percent at $1.2341. It fell more than 1 percent against the yen to around 112.60 yen.

EXPORTERS DRAG

Canon Inc (7751.T: ) fell 2.7 percent to 3,825 yen and Honda Motor Co (7267.T: ) shed 3 percent to 2,896 yen. Chip tester maker Advantest Corp (6857.T: ) slipped 2.9 percent to 2,120 yen.

Toyota Motor Corp (7203.T: ) was down 2.6 percent at 3,420 yen. The automaker said it will voluntarily fix 22,300 units of the Passo small car in Japan as the engine may stall.

Promise Co (8574.T: ) fell 5.8 percent to 653 yen after the consumer lender said it plans to cut its workforce by more than 30 percent as part of a restructuring plan.

Promise and rivals such as Acom Co (8572.T: ) and Takefuji Corp (8564.T: ), which offer unsecured personal loans mainly to borrowers with low credit, have been crippled by regulations introduced in 2007 that lowered maximum interest rates and court rulings forcing them to repay charges beyond the new limits.

But Resona gained 2.4 percent to 1,098 yen after the report by the Nikkei business daily, which traders hailed as a positive sign that the bank’s relationship with the government is normalizing.

Trade was moderate, with 2.1 billion shares changing hands on the Tokyo exchange’s first section, the lowest volume this week.

Declining shares outnumbered advancing ones by 3 to 1.

Penny Stocks

(Editing by Edwina Gibbs)

Nikkei hits 3-month closing low on euro zone worry