Nikkei slips 1.1 percent on European debt worries, Mizuho

By Aiko Hayashi

TOKYO (BestGrowthStock) – Japan’s Nikkei average slipped 1.1 percent on Tuesday, as euphoria over a $1 trillion package to prevent the spread of Europe’s debt crisis dissipated and as Mizuho Financial (8411.T: ) fell on news of a big share offering.

Sumitomo Mitsui Financial Group (8316.T: ) also tumbled as its affiliate consumer lender Promise (8574.T: ) slid after a loss warning while Toshiba Corp fell after unveiling capital spending plans that an analyst said raised the risk of a share offering.

Doubts over Greece’s ability to implement debt cuts as well as worries about weakness in the euro have kept Tokyo stocks this week from matching a 4 percent jump for U.S. stocks (Read more about the stock market today. ) — their strongest gain since March 2009. (FRX/: ) (.N: )

“Weakness in the euro is weighing on investor confidence. There are concerns whether the crisis plan will really come to fruition because each country still has to discuss it,” said Yutaka Miura, a senior technical analyst at Mizuho Securities.

“In today’s market environment, there’s no buying other than short-covering, and once that comes to a halt, the market gets overwhelmed by profit-taking.”

In moderate trade, the benchmark Nikkei (.N225: ) fell 119.60 points to 10,411.10, after earlier rising as much as 1.1 percent to 10,643.28. It erased most of the gains made the previous day when news of the European rescue package came during trading hours in Tokyo.

The broader Topix (.TOPX: ) fell 1.3 percent to 932.10.

Orders for Japanese stocks placed through 10 foreign securities houses before the start of trade on Tuesday showed selling for a fourth straight day.

The euro fell (Read more about the trembling euro. ) about 1 percent against the yen to around 118.00 yen a day after jumping almost 2 percent against the Japanese currency. Against the dollar, it stood around $1.2700, down 0.6 percent.

“What the EU did was really huge, but the fact that the euro is still weak despite that large a package shows that this problem has very deep roots,” said Masayoshi Okamoto, head of dealing at Jujiya Securities.

“Without more gains in the euro, markets will remain nervous.”

After the market close, Toyota Motor Corp (7203.T: ) 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 showrooms after its worst recall crisis.

But the automaker forecast a smaller-than-expected 90 percent rise in operating profit for the year to end-March 2011.

Prior to the news, the stock ended the day down 0.7 percent at 3,495 yen. Toyota came under new scrutiny on Monday from the U.S. government, which launched a probe into whether Toyota promptly notified safety regulators about a pickup truck recall for a steering system problem.

MIZUHO DROPS, PROMISE TUMBLES

Mizuho lost 4.7 percent to 163 yen, becoming the most actively traded stock by volume on the main board, after sources told Reuters that it plans to issue about $8.7 billion of shares to meet stricter capital requirements.

Mizuho has been under pressure to raise new capital after top lender Mitsubishi UFJ Financial Group (8306.T: ) raised about $15 billion and third-ranked Sumitomo Mitsui about $20 billion in their two rounds of fundraising between December 2008 and February this year.

Mizuho raised only $5.7 billion in the same period.

Investors dumped shares of companies reporting disappointing earnings outlooks.

Shares of Promise Co (8574.T: ) tumbled 17.4 percent to 713 yen after the consumer lender warned it would likely fall back into the red this year, defying expectations for a small profit in a sign the industry may not be past the worst.

Among other big consumer lenders, Acom Co (8572.T: ) dropped 7.6 percent to 1,284 yen and Takefuji Corp (8564.T: ) lost 6.4 percent to 335 yen.

Japan Steel Works (5631.T: ) shed 4.6 percent to 935 yen after it issued an operating profit forecast 21 percent below the previous year’s result and just under a consensus estimate from Thomson Reuters I/B/E/S.

Toshiba ended down 4.4 percent at 495 yen after saying it would invest $14 billion over the next three years in its chip and nuclear power businesses.

But Sumitomo Heavy Industries (6302.T: ) jumped 3.9 percent to 593 yen after it said it will make Nihon Spindle (6242.T: ), a maker of spindles and rings for spinning machines, a wholly owned subsidiary to seek synergy effects for further business growth.

Shares of Nihon Spindle ended up 31.3 percent at 210 yen.

Some 2.7 billion shares changed hands on the Tokyo exchange’s first section, not too far away from Friday’s 3.1 billion shares, the highest volume in about four months.

Declining stocks outnumbered advancing ones by 2 to 1.

Stock Analysis

(Additional reporting by Elaine Lies; Editing by Edwina Gibbs)

Nikkei slips 1.1 percent on European debt worries, Mizuho