Nikkei slips 0.2 percent on European woes, China weighs

By Aiko Hayashi

TOKYO (BestGrowthStock) – Japan’s Nikkei average slipped 0.2 percent on Wednesday, erasing earlier gains as concern about the euro zone’s debt woes continued to weigh on market confidence even after a $1 trillion European rescue package.

Construction machinery maker Komatsu Ltd (6301.T: ) and other companies that depend on Chinese demand fell amid signs of mounting inflationary pressure in China, which is seen pointing to further policy tightening by Beijing, market players said.

Some market players said a fall in U.S. futures also weighed on the market following a Wall Street Journal report that U.S. federal prosecutors are investigating whether Morgan Stanley misled investors about mortgage-derivative deals it helped design and sometimes bet against.

The benchmark Nikkei eked out small gains earlier in the day, helped by a forecast-beating quarterly profit from Toyota Motor Corp (7203.T: ) and an upbeat growth forecast from electronics conglomerate Hitachi Ltd (6501.T: ).

“Aside from the problems in Europe, investors in Japan are particularly paying attention to the outlook for the Chinese economy. There are concerns that policy tightening in the face of higher prices would be overdone there,” said Tsuyoshi Segawa, an equity strategist at Mizuho Securities.

“But earnings haven’t been bad, and I don’t expect the market will lose too much ground at this point.”

The benchmark Nikkei (.N225: ) closed down 17.07 points at 10,394.03, after rising nearly 1 percent at one stage.

The broader Topix (.TOPX: ) was almost unchanged at 932.83.

Support was expected to solidify around 10,300, just below the Nikkei’s 200-day moving average, with the Nikkei’s relative strength index (RSI) at around 37. Anything from 30 and below is regarded as oversold.

Still, orders for Japanese stocks placed through 10 foreign securities houses before the start of trade on Wednesday showed selling for a fifth straight day.

“Since the start of this month, foreigners have really been selling Japanese stocks, partly because Japanese markets were closed for holidays and foreign markets fell during that time, and partly because the Greek debt crisis really worsened,” said Hideyuki Ishiguro, a strategist at Okasan Securities.

“At this point, I don’t think a lot of this money is flowing into other Asian share markets. It’s probably going into U.S. Treasury bonds and gold as part of a shift from riskier assets.”

After the market close, Nissan Motor Co (7201.T: ), Japan’s No.3 automaker, forecast a 12 percent rise in operating profit this year as it prepares an aggressive drive into emerging markets such as India with a new global compact car.

Before the news, the stock ended the day up 1.1 percent at 745 yen.

MACHINERY MAKERS DOWN, TOYOTA CLIMBS

Shares of companies with exposure to China fell on a combination of worries about Chinese monetary tightening and weakness in Shanghai shares (.SSEC: ).

Machinery maker Komatsu (6301.T: ) fell 1 percent to 1,716 yen and shipper Kawasaki Kisen (9107.T: ) slid 2.7 percent to 359 yen. Hitachi Construction (6305.T: ) lost 2.2 percent to 1,845 yen.

China’s consumer price inflation pushed up to an 18-month high of 2.8 percent in April from a year earlier and banks’ new lending topped expectations, although overall monthly data showed the economy was not overheating.

Chinese property prices in 70 cities rose 12.8 percent in April from a year earlier, the fastest pace on record.

But Toyota’s shares rose 2.7 percent to 3,590 yen. The world’s largest automaker comfortably beat forecasts with a fourth-quarter profit (Read more your timing to make a profit.) as it cut costs and its aggressive sales incentives swiftly drew U.S. customers back to its popular Prius hybrid and Corolla sedans in the wake of its recall problems.

Hitachi Ltd jumped 4.7 percent to 400 yen after Japan’s largest electronics conglomerate swung back to profitability in the latest quarter on a pickup in demand and cost cuts, and forecast stronger-than-expected growth this year.

NTT Data Corp (9613.T: ) surged 10.5 percent to 357,000 yen after the company’s forecast beat expectations and UBS upgraded it to “buy” from “neutral”, with analyst Sumito Takeda citing cost cuts and management plans to improve group profitability.

Sumitomo Metal Mining (5713.T: ) gained 3.7 percent to 1,372 yen after gold jumped nearly 3 percent to an all-time high at above $1,230 an ounce on Tuesday.

Trade was moderate, with 2.6 billion shares changing hands on the Tokyo exchange’s first section, down from the 3.1 billion, a four-month high, marked last Friday.

Declining shares outnumbered advancing ones by 804 to 736.

Stock Market News

(Additional reporting by Elaine Lies; Editing by Joseph Radford)

Nikkei slips 0.2 percent on European woes, China weighs