Nikkei slips 0.25% as strong yen weighs, market eyes earnings peak

20:00, October 26, 2010      

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Tokyo stocks fell for a second day Tuesday, with the key Nikkei stock index slipping 0.25 percent as the yen's strength weighed heavily on the market and investors remained passive in a day of narrow trade, opting for a wait-and- see-approach as earnings season in Japan is set to peak and recent currency moves will impact firms' outlooks.

Brokers said that trade was directionless as investors were hitting the sidelines as the yen's continued strength dashed sentiment and sparked concerns that corporate earnings will be negatively affected.

The yen hit a fresh 15-year high against the U.S. dollar, hovering in the upper-80 yen zone, having logged a record 15-and-a- half-year high on Monday.

"Investors are caught between a rock an a hard place as choices to buy or sell both come with equal worries," said one local strategist.

"As the yen approaches record highs with the 79-level looking entirely possible, we could see a sell off despite the potential of positive outcome of some major corporate earnings reports."

"Given the strength in the yen, investors have begun to worry that major companies will need to bring down their assumption rates for dollar/yen and the possibility that that would lead to downward revisions to their earnings outlooks," added Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities.

The 225-issue Nikkei Stock Average closed down 23.78 points from Monday to 9,377.38, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange lost 3.29 points, or 0.40 percent, to 817.94.

Exporters including vehicle makers and high-tech firms came under pressure from the yen's strength and Toyota fell 0.9 percent to 2,866 yen and its largest parts supplier, Denso Corp., lost 1.7 percent to 2,487 yen.

Yamaha Motor Co., the world's second-largest motorcycle maker, slid 2 percent to 1,199 yen, following the company recalling 136, 378 motorcycles made by its Brazilian unit. The recall will cost the company some 2.35 billion yen (29 million U.S. dollars).

Industrial robotics maker Fanuc Inc. lost 1.2 percent to 11,120 yen and Canon Inc., the world's largest manufacturer of digital cameras, relinquished 1.1 percent to 3,705 yen.

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