Tokyo stocks close sharply down on European debt woes

21:00, April 28, 2010      

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Tokyo stocks reversed two days of gains Wednesday as Greece and Portugal's credit downgrades shook global markets, causing investors to worry other countries in the eurozone might become affected.

The 225-issue Nikkei Stock Average fell 287.87 points, or 2.57 percent, from Tuesday to 10,924.79.

The broader Topix index of all First Section issues on the Tokyo Stock Exchange was down 19.99 points, or 2.00 percent, to 977.64.

Hopes for further upbeat corporate earnings reports from Japanese firms that have leant the market support in spite of global economic concerns were dashed by rising fears about European debt following international credit agency Standard and Poor's slashing of Greece's rating to junk and lowering of Portugal's rating by two notches.

Analysts said investors fear the downgrade of these two nations may be the beginning of a series of such moves as most governments are burdened with debt after they spent their way out of recession following the credit crisis.

Even the U.S. may be under threat of losing its top rating, economists noted.

In a bid to stem the global panic about Europe's fiscal health, European Union President Herman Van Rompuy said on Wednesday that negotiations on debt-riddled Greece are on track and restructuring the debt is not being considered.

"Negotiations are going on, they are well on track, and there is no question about restructuring of the debt," Rompuy told a news conference in Tokyo ahead of an annual summit with Japanese leaders, adding that he will convene a summit of eurozone heads of state by around May 10, at which leaders will move to implement a joint bailout package for Greece.

But brokers said that his comments did little to inspire confidence in markets already severely rattled by the credit crisis in Europe.

"People are worried the Greece issues will spread," said Koichi Kurose, chief strategist in Tokyo at Resona Bank Ltd.

"Investors aren't sure whether Greece will be saved."

One Tokyo-based analyst commented that investors now fear the problems in Europe could derail the entire global economic recovery process, whilst others felt the implications were shorter- term.

"Greece's problems are unlikely to have negative a impact on the global economy, in my opinion, given the size of its GDP. The issue has been used as an excuse to sell stocks -- you need to remember there are other concerns such as U.S. financial regulation and Goldman Sachs," said Fumiyuki Nakanishi, investment information manager at SMBC Friend Securities.

The yen, seen as a safe currency haven in times of economic turmoil, duly appreciated against the euro and the U.S. dollar and subsequently Japanese exporters, particularly those heavily reliant on European markets, took a pummeling on Wednesday.

Sony Corp. fell more than 3 percent to 3,285 yen and Canon Inc., which counts Europe as its largest market, lost more than 2 percent, to 4,275 yen. Kyocera Corp. dropped 3 percent to 9,370 yen and Advantest Corp. plunged 5.2 percent to 2,386 yen.

Tokyo Electron Ltd. relinquished 3.7 percent to close at 6,170 yen.

Industrial robotics maker Fanuc Ltd. having surged 11 percent on Tuesday after reporting full-year results and profit forecasts that beat analyst estimates, sank on Wednesday, falling 5.3 percent to 11,050 yen as investors opted to lock in profits after recent gains.

East Japan Railway Co. slumped 6.4 percent to 6,250 yen after reporting worse than expected profit results for the past financial year and Nomura Holdings Inc. downgrading its investment rating on the firm.

Financial issues, highly susceptible to economic swings, fell with Mizuho Financial Group Inc. losing more than 1 percent, to 182 yen and top-lender Mitsubishi UFJ Financial Group Inc. dropping 2 percent.

Some 2.47 billion shares changed hands on the Tokyo exchange's First section, up from Tuesday's volume of 2.20 billion shares.

Declining issues outnumbered advancing ones by 1,476 to 151.



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