Nikkei set to fall after Wall St tumble, yen rise

TOKYO (BestGrowthStock) – Japan’s Nikkei average is set to fall on Wednesday, dropping below support around its 25-day moving average, with a tumble on Wall Street and a stronger yen likely to spur profit-taking after two days of gains.

But a sharp sell-off is unlikely amid hopes for a recovery in corporate earnings with many firms reporting better-than-expected profits or revising up their earnings guidance.

Sharp Corp (6753.T: ) may draw attention after the electronics maker beat market expectations with a forecast for annual operating profit to more than double to its highest in three years, after it swung to a quarterly profit on strong sales of display and solar panels.

U.S. stocks (Read more about the stock market today. ) posted their worst day in nearly three months on Tuesday as downgrades of Greece and Portugal fueled fears about euro zone economic stability, and a grilling of Goldman Sachs on Capitol Hill heightened the possibility of financial reform. (.N: )

“Many companies are forecasting earnings above market consensus, making investors more optimistic,” said Toshiyuki Kanayama, a market analyst at Monex Inc. “But all that good news will be overshadowed by a drop on Wall Street and a higher yen.”

The yen rose against the euro and the dollar after a downgrade of Greece and Portugal’s credit ratings prompted investors to cut risks.

The Nikkei (.N225: ) inched up 0.4 percent on Tuesday to 11,212.66. Market players expect the benchmark average to move between 10,800 and 11,000 on Wednesday.

Analysts and traders said the Nikkei may fall below its 25-day moving average, now around 11,100. But should this happen, support is seen holding at 10,800, roughly a 38.2 percent retracement of a two-month rally that started in early February and pushed the Nikkei up to an 18-month peak of 11,408.17 in early April.

In a sign the market may open lower, Nikkei futures traded in Chicago closed at 10,915, down from the Osaka close of 11,210 on Tuesday.

STOCKS TO WATCH

— Mazda Motor Corp (7261.T: ), Mitsubishi Motors Corp (7211.T: )

Mazda and Mitsubishi Motors, Japan’s No.5 and No.6 automakers, forecast a more than trebling in annual operating profit on Tuesday, counting on new models to ride a sales recovery in the United States and other markets.

— Kyocera Corp (6971.T: )

Kyocera, one of Japan’s most profitable technology firms, forecast operating profit would rise 91 percent to 122 billion yen in the year to next March, above 107 billion yen in a mean estimate in a poll of 17 analysts by Thomson Reuters I/B/E/S.

— Komatsu Ltd (6301.T: )

Construction machinery maker Komatsu said it expects operating profit to more than double this financial year on a 16 percent rise in revenue, counting on strong demand from emerging economies and a lower cost base.

Investing Analysis

(Reporting by Rika Otsuka; Editing by Chris Gallagher)

Nikkei set to fall after Wall St tumble, yen rise