Nikkei hits 7-week closing low

By Chikafumi Hodo and Aiko Hayashi

TOKYO (BestGrowthStock) – Japan’s Nikkei average fell 1.8 percent to a seven-week closing low on Friday as disappointing earnings hit shares of companies such as Sharp, with downward momentum accelerating after the index breached a key technical support level.

Investors were keen to lighten long positions ahead of the weekend and before a blizzard of earnings reports due after the close on Friday and a highly anticipated Federal Reserve policy-setting meeting on November 2-3.

“I realize exporter shares are under pressure due to worries about a strong yen, but the Nikkei as a whole has also far lagged behind U.S. and European shares,” said Masaru Hamasaki, a senior strategist at Toyota Asset Management.

“The Nikkei will likely play catchup at some point and one catalyst may be the Fed’s meeting, with eyes on whether it will decide on additional easing measures on a scale in line with market expectations.”

The benchmark Nikkei ended down 163.58 points at 9,202.45, its lowest close since September 9, while the broader Topix slipped 0.4 percent to 810.91.

Traders said foreign brokerages could be actively selling in the futures market on behalf of foreign hedge funds and other institutions.

Some said weak economic data also put a damper on investor confidence. Japanese factory output fell for the fourth straight month in September, the longest streak of declines in more than a year, adding to signs the economy is losing momentum as slowing export growth and a strong yen bite.

Hurt by worries about the strength of the yen and its impact on corporate earnings, the Nikkei shed 1.8 percent in October, its biggest monthly fall since August. It fell 2.4 percent on the week, also its worst weekly fall in two months.

So far this year, the Nikkei has lost nearly 13 percent, while the Dow Jones industrial average has gained 6.6 percent and Britain’s FTSE 100 is up about 5 percent.

In Asia trade, the yen advanced 0.5 percent to 80.64 to the dollar, coming closer to a 15-year high of 80.41 yen reached earlier in the week and a postwar historic high of 79.75 yen marked in April 1995.

Technical sentiment toward the Nikkei faltered as it dropped below the closely watched support of 9,300 for the first time since September 15, traders said, a day when share prices rose sharply after Japanese authorities intervened in the currency market for the first time in six years.

Around 9,300 is where a narrow band of both the upper and lower level of the Nikkei’s daily Ichimoku cloud comes in.

Analysts said the Nikkei could now test 9,000, which was last broken on September 8, and then around 8,800, the index’s low for the year.

“The Nikkei broke below the key support level of around 9,300, partly due to heavy sales of futures at the open, and technically more downward pressure now looks to be in store,” said Yumi Nishimura, deputy general manager at Daiwa Securities Capital Markets.

EARNINGS IN FULL SWING

Despite sharp falls in the overall market, investors were cautious about selling too aggressively head of a slew of results scheduled for later in the day.

After the close, Sony Corp said it swung back to a profit in the second quarter on an improved performance in its PC and game businesses, and raised its outlook despite tough price competition and a strong yen.

Honda Motor Co posted a more than doubling in quarterly profit as sales in Asia soared, and lifted its annual forecasts for a second time as it absorbs currency losses with further cost cuts.

Sony ended the day down 1.4 percent at 2,690 yen, while Honda fell 0.3 percent to 2,937 yen.

Sharp lost 5.8 percent to 795 yen after the electronics maker lowered its full-year earnings forecast closer to market expectations and reported that its quarterly profit fell 24 percent, hurt by sluggish demand for liquid crystal display panels and a stronger yen.

Shares of Nintendo fell 2.1 percent to 20,850 yen after its quarterly profit halved, hit by a strong yen and slowing sales of game machines, underscoring a steady decline in earnings that some analysts warn could stretch well into next year.

Acom Co, Japan’s largest consumer lender by market value, lost 5.4 percent to 923 yen after saying it would book a first-half loss as it covers the cost of paying back overcharged interest to borrowers.

In contrast, shares of companies that had bullish earnings outlooks gained.

Hitachi Ltd rose 4 percent to 364 yen after Japan’s biggest electronics conglomerate hiked its full-year profit outlook by 21 percent, beyond market expectations, on improvements in most of its business segments, including industrial systems and construction machinery.

Sumitomo Mitsui Financial Group gained 2.1 percent to 2,412 yen after the bank said on Thursday its first-half profit would be more than double a previous forecast.

Trade picked up on the Tokyo exchange’s first section, with 2.15 billion shares changing hands, its biggest volume in two weeks.

Declining stocks outnumbered advancers 992 to 580.

(Editing by Michael Watson)

Nikkei hits 7-week closing low