Nikkei marks biggest fall in over one month

By Elaine Lies

TOKYO (BestGrowthStock) – Japan’s Nikkei average fell nearly 3 percent on Friday for its worst one-day percentage loss in over a month as investors took profits before a long weekend, worried that the yen could rise further toward 15-year highs against the dollar.

Trade was thin as technicals turned increasingly bearish, with some in the market saying large-lot selling of futures by a foreign investor shortly after the open had set off position-cutting that picked up speed.

The benchmark Nikkei shed 2.9 percent to 9,408.36 after briefly falling more than 3 percent, its worst such loss since June 7, breaking through a succession of support levels.

It lost 1.8 percent on the week.

“Risk avoidance is increasing and investors are unwinding long positions now ahead of the weekend,” said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley.

“If the yen rose by 1 or 2 yen against the dollar during that time, it would be really tough.”

Japanese markets are closed on Monday, a situation that makes some traders nervous since the collapse of Lehman Brothers in 2008 also happened on a three-day weekend in Japan.

The dollar weakened to near 2-1/2-month lows against a basket of currencies on Friday and was heading back toward a seven-month low of 86.96 yen hit in early July.

Market players said earlier this week that long positions had accumulated in the market, particularly in blue-chip exporters such as Sony Corp and Toyota Motor Corp

Wall Street ended flat after spending much of Thursday in negative territory after an unexpected fall in regional factory activity and a third straight month of decline in producer prices raised concerns about deflation, cooling enthusiasm for the strong start to the earnings season.

JPMorgan Chase & Co reported quarterly earnings that beat expectations but offered a cautious outlook on the economy.

“The U.S. indicators have been pretty poor even though (corporate) results were good, and the Fed’s gloomy view of the economy the other day has really increased overall uncertainty,” said Noritsugu Hirakawa, a strategist at Okasan Securities.

Technicals have also turned gloomy, with the Nikkei’s MACD now pointing downwards, as is its slow stochastic — a measure of how oversold the market is and whether it is in a short-term up or down trend. Both indicate a dip may lie in wait.

“The micro base for the U.S., including things such as the Intel results earlier this week, is pretty good, but the macro base really isn’t, and this is raising a lot of concern about the U.S. economy going forward,” said Yutaka Miura, senior technical analyst at Mizuho Securities.

“Nothing’s certain, but it looks as if we could be in for a bit of a correction.”

EXPORTERS BASHED

The greenback had lost 0.4 percent to 87.06 yen after falling more than 1 percent the day before, with the euro down 0.6 percent at 112.34 yen.

One market player said attention was shifting from the euro to the dollar as concerns about the U.S. economy grew, while the euro has gained some support as “stress tests” being conducted on European banks to check the resistance of the financial sector to shocks were showing banks standing up well.

Exporters suffered as a result. Investors fret about a stronger yen since it eats into exporter profits when repatriated, and quarterly earnings reports pick up steam in several weeks, increasing investor jitters.

Canon Inc slipped 3.2 percent to 3,380 yen and Tokyo Electron lost 2.8 percent to 4,820 yen. Sony Corp fell 5 percent to 2,404 yen.

Few sectors escaped the broad-based selling.

One gainer was trader Mitsui & Co, which edged up 0.4 percent to 1,135 yen after BP said on Thursday that no oil was leaking from its blown-out well in the Gulf of Mexico for the first time since the accident began in April. Mitsui & Co owns 10 percent of the well.

Shares of Land Co rallied 3.2 percent to 32 yen after the real estate developer reported a group net profit of 75 million yen for the three months to May 31, after a 1.8 billion yen loss a year ago, thanks to a recovery in apartment sales.

Trade was thin but picked up slightly, with 1.7 billion shares traded on the Tokyo exchange’s first section. Declining shares outnumbered advancing ones by more than 6 percent.

(Reporting by Elaine Lies; Editing by Joseph Radford)

Nikkei marks biggest fall in over one month