Nikkei sinks 2.11 pct as U.S. economic fears, strong yen weigh

16:55, August 04, 2010      

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Tokyo stocks relinquished gains made Tuesday with the key Nikkei stock index losing 2.11 percent on Wednesday as a strong yen battered export-related issues and concerns grew about the strength of the U.S. economic recovery.

The U.S. dollar slumped to a fresh eight-month low against the yen as speculation mounted that the U.S. Federal Reserve may intervene in the nation's currency to fortify the world's largest economy.

Subsequently exporters led Wednesday's decline that saw the 225- issue Nikkei Stock Average lose 204.67 points, or 2.11 percent, from Tuesday to 9,489.34.96 and the broader Topix index of all First Section issues on the Tokyo Stock Exchange sink 13.25 points, or 1.54 percent, to 845.93.

The yen hit highs of 85.33 against the U.S. dollar Wednesday in Tokyo, the strongest level since Nov. 27.

The Japanese currency also appreciated against the euro, strengthening to as much as 112.71.

Investors fret when the yen is strong as profits made overseas are eroded when converted back into the home currency.

"Investors will likely sell exporters, being wary of earnings deterioration from the stronger yen," said one Tokyo-based equities manager.

"I thought a summer rally would continue in Japanese stocks for a bit more, but instead the market is now driven by worries about deflation in the United States and currency moves," said Takashi Kamiya, chief economist at T&D Asset Management.

He added that although stocks are reasonably priced at this point, further gains will be hard to attain as U.S. consumer spending and a bleak employment situation, against backdrop of fading global stimulus measures, has investors concerned about a double-dip.

An index of U.S. homes available for purchase slid to a record low in June while consumer spending and personal incomes were flat and new orders received by U.S. factories came in worse-than- expected.

St. Louis Fed President James Bullard said on Monday that the Federal Reserve must have a plan in place to deal with the threat of a new economic downturn and all eyes are now on the highly anticipated U.S. non-farm payrolls data due out on Friday.

"Investors were too optimistic for the U.S. economic data," said a local strategist. "The U.S. data had a large effect on the currency market."

NSK Ltd. plunged 6 percent to 594 yen, the sharpest slide since June 2009. The bearing maker had its share-price estimate cut to 770 yen from 800 yen at Barclays Capital.

Tokyo Electron Ltd. fell 5 percent to 4,510 yen, due to the strength of the yen and similarly Canon Inc. sank 4.3 percent to 3, 650 yen. Kyocera Corp. relinquished 2 percent to 7,660 yen.

Meanwhile Panasonic Corp. fell 2 percent to 1,098 yen, following news the electronics maker's China unit will recall 365, 574 refrigerators in China from today due to faulty temperature control components.

Among Japanese automakers Suzuki Motor Corp. declined 3.8 percent to 1,797 yen, following Japan's second-largest minicar maker's U.S. sales slumping 44 percent in July.

Nissan Motor Corp. dropped 4.3 percent to 648 yen, despite the firm reporting a 15 percent rise in its U.S. July auto sales.

Toyota shares fell 1.6 percent to 3,090 yen, although the firm Wednesday raised its full-year profit forecast citing a recovery of sales in North America and increased deliveries in Asia.

Toyota announced in a statement today it expects net income of 340 billion yen (3.98 billion U.S. dollars) in the year ending in March, compared with an earlier estimate of 310 billion yen. Sales may total 19.5 trillion yen (227.05 billion U.S. dollars), compared with an earlier forecast of 19.2 trillion yen, the world' s largest automaker said.

A notable decliner on today's market was NTT Data Corp. who tumbled 5.8 percent to 300,000 yen, following the unit of Nippon Telegraph & Telephone Corp. saying its first-quarter net income declined 22 percent to 5.85 billion yen (68.11 million U.S. dollars) with lower sales.

Bucking Wednesday's downward trend however, United Arrows Ltd. climbed 5.6 percent to 1,149 yen, as the apparel chain said same- store sales increased 11 percent in July with a 14.5 percent gain in customer traffic.

Some 1.60 billion shares changed hands on the Tokyo exchange's First section, down from Tuesday's volume of around 1.78 billion, with declining issues outnumbering advancing ones by 1,451 to 142.



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