Nikkei slips 0.6 pct as Toyota weighs but Honda gains

* Arbitrage trade of Honda and Toyota likely emerged-analyst

* Most good earnings priced in, failing to lift market-analyst

By Aiko Hayashi

TOKYO, Feb 4 (BestGrowthStock) – Japan’s Nikkei average fell 0.6
percent on Thursday, weighed down by a slide in Toyota Motor Corp
(7203.T: ) as its recall woes dragged on, though Honda Motor Co
(7267.T: ) climbed after it lifted annual guidance far above market
expectations.

Sharp Corp (6753.T: ) dropped 5.4 percent after reporting a
smaller-than-expected quarterly profit, reflecting start-up costs
at its new display panel plant. [ID:nTOE612063]

In the latest development in Toyota’s huge U.S. recall, the
Obama administration stepped up pressure on the company on
Wednesday to address a range of safety issues as investors bolted
at signs of a deepening crisis for the world’s largest automaker.
[ID:nSGE612025]

U.S. Transportation Secretary Ray LaHood also advised owners
of recalled vehicles to stop driving their cars, before
characterising the remark as a misstatement. [ID:nN03169882]

“Selling is dominating, with good earnings running their
course after expectations for those results already buoyed the
Nikkei to near 11,000 earlier this year,” said Hiroaki Kuramochi,
chief equity marketing officer at Tokai Tokyo Securities.

“But companies reporting surprising results such as Honda are
an exception. Some investors appear to be engaged in arbitrage
trade, selling Toyota and buying Honda. Toyota’s problems will
likely deeply impact its outlook and something like ‘Toyota
bashing’ emerging in America will also have a lasting impact.”

The benchmark Nikkei (.N225: ) fell 60.07 points to 10,344.26,
after rising 0.3 percent the previous day.

The broader Topix (.TOPX: ) retreated 0.8 percent to 908.83.

Toyota fell 3.5 percent to 3,280 yen, extending losses as its
unprecedented recall of millions of vehicles with faulty
accelerators takes a toll on sales and may force the automaker to
cut it 2010 sales forecasts.

Toyota reports its third-quarter earnings later in the day.

Shares of Honda advanced 2.2 percent to 3,210 yen after it
lifted annual guidance far above market expectations, with cost
cuts driving a jump in quarterly profit, and said it anticipates
further growth next financial year. [ID:nSGE61209G]

Sharp declined to 1,071 yen, even though it forecast tight
LCD supply for 2010, raising hopes for a further earnings
recovery.

Other Japanese companies set to report results later in the
day include Sony Corp (6758.T: ), Hitachi Ltd (6501.T: ) and Nikon
Corp (7731.T: ).

Stock Market Trading
(Editing by Hugh Lawson)

Nikkei slips 0.6 pct as Toyota weighs but Honda gains