Nikkei slips 1.2 percent

By Aiko Hayashi and Elaine Lies

TOKYO (BestGrowthStock) – Japan’s Nikkei average fell 1.2 percent on Tuesday, with tech shares hit by worry over the pace of U.S. economic recovery, disappointing U.S. corporate results and a strong yen.

Traders returned from a three-day weekend and were playing catch-up with other Asian markets that fell on Monday due to a sharp drop in U.S. consumer sentiment.

Charts suggested a further dip may still lie ahead, with the Nikkei’s MACD, a measure of market momentum, nearing a bearish cross while its slow stochastic — a measure of how oversold the market is and whether it is in a short-term up or down trend — continued to fall.

On Monday, Wall Street rose on hopes for earnings from Texas Instruments (TXN.N: ) and fellow tech firm International Business Machines (IBM.N: ), but shares of both slumped in after-hours trade as Texas Instruments’ revenue failed to impress and IBM’s revenue missed expectations.

“It’s a sign that the economic recovery is slowing down when companies report profits that are above market expectations but their sales figures remain sluggish,” said Kazuhiro Takahashi, general manager at Daiwa Securities Capital Markets.

He said, however, that market participants may have just used the revenue figures as an excuse to take profits after stock markets had risen on expectations of strong corporate results, adding that the market still had hopes for this earnings season.

The dollar edged up 0.3 percent against the yen to 86.98 yen after falling to a seven-month low on Friday, prompting some short-covering and helping the Nikkei pare losses after it sustained its worst one-day percentage fall in over a month on Friday. (FRX/: )

Eyes remain on moves in the currency markets and U.S. earnings results, market players said, with Goldman Sachs (GS.N: ), Apple Inc (Read more about Apple stock future.) (AAPL.O: ) and Yahoo Inc (YHOO.O: ) set to report later on Tuesday.

The benchmark Nikkei (.N225: ) shed 107.90 points to 9,300.46 after earlier falling as much as 1.7 percent, while the broader Topix (.TOPX: ) lost 1 percent to 832.26.

Japanese markets were closed on Monday for a holiday and on Friday the Nikkei fell nearly 3 percent.

On Monday, the NAHB/Wells Fargo Housing Market index fell more than expected in July to its lowest level since April 2009 after a popular tax credit for homebuyers expired in April, underlining fears about the economic recovery ahead of housing data including housing starts on Tuesday.

“There’s a slight ebbing of risk avoidance but some of the U.S. results are cause for concern, especially some not very good forecasts for later in the year, and this is affecting the Nikkei,” said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley Securities.

“A substantial break below 9,200 would leave us with few real support levels until around 9,000, but we’d probably need a substantial drop in either overseas stock markets or a surge in the yen for this to happen.”

Market players said support for the Nikkei was likely to hold for now at 9,200, just under its July 1 close, which was a seven-month closing low.

While charts look bearish, the benchmark is also approaching oversold levels on some fronts. Its relative strength index (RSI) hit 40, its lowest in roughly two weeks, with anything from 30 and below considered oversold, and its slow stochastic was approaching oversold territory.

Trade continued to be light on the Tokyo exchange’s first section, with 1.8 billion shares changing hands. Last Wednesday it hit its heaviest volume in more than a month just above 2.3 billion shares.

Declining stocks outnumbered advancing ones by 2 to 1.


Tech shares were hit by disappointment over U.S. corporate results. Chip gear manufacturer Tokyo Electron (8035.T: ) lost 2.9 percent to 4,680 yen and electronic components maker TDK Corp (6762.T: ) shed 2.1 percent to 4,995 yen.

Other exporters also fared poorly. Investors fret about a stronger yen since it eats into exporters’ profits when they are repatriated.

Honda Motor Co (7267.T: ) fell 1.8 percent to 2,605 yen. After the close, Honda said it would launch a plug-in hybrid car and a battery electric model in the United States and Japan in 2012.

Shares of Daiwa Securities Group (8601.T: ), Japan’s second-largest brokerage, dropped 3.1 percent to 376 yen after the Nikkei business daily reported the company likely suffered a loss in April-June, as financial market turmoil stemming from the Greek debt crisis took a toll.

Japan Drilling (1606.T: ) and other offshore drilling and oil development firms fell as seepage continued near a blown-out Gulf of Mexico oil well and as U.S. lawmakers considered a range of rules that could require tougher safety regulations on offshore drilling.

Japan Drilling tumbled 12.9 percent to 2,699 yen and Modec (6269.T: ) fell 6.8 percent to 1,335 yen.

Stock Market Analysis

(Editing by Edwina Gibbs)

Nikkei slips 1.2 percent