Nikkei falls 0.72 percent on U.S. job data, currency woes

18:06, August 09, 2010      

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Tokyo stocks retreated Monday with the key Nikkei stock index falling 0.72 percent as worse-than- expected U.S. jobs data sparked fears for the health of the world' s biggest economy and a strong yen weighed on exporter-related issues.

The 225-issue Nikkei Stock Average dropped 69.63 points, or 0. 72 percent, from Friday to 9,572.49, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange closed down 3.55 points, or 0.41 percent, to 857.62.

Analysts said that coupled with a resurgent yen, U.S. nonfarm jobs data released on Friday showed a decline of 131,000 jobs in July, far exceeding economists' expectations and sending Wall Street lower, which adversely affected investor sentiment Monday.

Brokers added that concerns have now been raised as to whether the Federal Reserve will take monetary easing measures at its FOMC (Federal Open Market Committee) meeting scheduled for Tuesday.

"After the poor jobs data, the focus is now on whether the Fed will further ease its monetary policy. The yen has already risen to around 85 yen on expectations that the Fed might do so," said one local analyst.

"If the Fed really decides to further ease its monetary policy, dollar-yen might try to reverse course as the news will have run its course," he said.

Compounding investor jitters on Monday was Goldman Sachs Group Inc. lowing its economic growth outlook for Japan and the U.S., citing the likelihood of a "significant falloff" from stimulus measures and slowing export growth for Japan.

The U.S. recovery is losing a "considerable amount of its momentum," the firm said in a report on Monday.

"The Japanese economy relies on demand from the U.S. and Asia because domestic demand is not promising," said one Tokyo-based strategist.

"Exporters may face reduced earnings prospects if the yen shifts to the range of the low 80 yen level."

After a prolonged sell-off, brokers said that investors hit the sidelines in later trade, ahead of the highly anticipated results of policy-setting meetings by both the U.S. Federal Reserve and the Bank of Japan on Tuesday.

Many Japanese exporters have set their currency rate assumptions around 90 yen per dollar for the financial year to next March, hence when the yen is strong exporters' profits are eroded when expatriated.

The yen hit 85.27 against the dollar during trading hours in Tokyo, its highest since November and subsequently domestic firms reliant on overseas profits retreated.

Sony Corp., maker of the Bravia series of LCD TVs and CyberShot digital cameras fell 1 percent to 2,700 yen and Canon Inc., the world's biggest maker of digital cameras, lost almost 2 percent to 3,670 yen.

Toyota Motor Corp. skidded down 1.4 percent to 3,070 yen and chip tester maker Advantest Corp. relinquished 1.9 percent to 1, 844 yen.

Trading houses and commodity-related issues declined as crude oil for September delivery fell 1.6 percent in New York on Aug. 6, the biggest decline since July 27 and copper futures slid 0.3 percent in New York, for a second successive day.

Sumitomo Metal Mining plunged 4.7 percent to 1,135 yen, following the company's announcement it expects an operating profit of 79 billion yen in the year ending March, some way off economists' forecasts.

Ebara Corp. however surged 8.5 percent to 369 yen, its steepest increase since August 2009.

The pump maker posted first-quarter net income of 988 million yen, compared with a net loss of 1.98 billion yen a year earlier, as sales dropped. The company also raised its first-half earnings projection.

Credit Saison Co. was another notable gainer on Monday, climbing 3.4 percent to 1,174 yen. The consumer-credit company announced its first-quarter net income rose 34 percent to 6.75 billion yen, following a reduction in marketing expenses and personnel costs.

Some 1.25 billion shares changed hands on the Tokyo exchange's First section, the lowest volume this year and down from Friday's volume of around 1.57 billion, with declining issues outnumbering advancing ones by 794 to 696.

Source: Xinhua


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