Nikkei drops 0.42 pct on weak U.S. data, Sony, automakers weigh

12:11, May 28, 2011      

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Tokyo stocks fell Friday, with the key Nikkei stock index losing 0.42 percent as concerns about the U. S. economy, a firmer yen and Sony Corp's disappointing earnings outlook soured the market mood.

Stocks came under earlier pressure as the government announced before markets opened that April's core consumer prices had risen 0.6 percent year-on-year, marking the first rise in CPI in more than two years.

Analysts said that as food and energy costs rise and Japanese companies pass increased buying and production costs onto the consumers, inflation could accelerate at an unanticipated rate in the short-to-mid-term, amplified by the negative economic impact of the March 11 disasters.

"The CPI uptick came mostly from higher materials costs being passed on to consumers rather than an increase in demand and that could hurt consumer spending," said Hideyuki Ishiguro, a strategist at Okasan Securities.

Following the Nikkei's rise the previous day, brokers also said that some investors were opting for profits as the yen's rise dented exporters' outlook and downbeat news about the U.S. economy ahead of long weekends in the U.S. and the U.K. sent others to the sidelines.

The U.S. Commerce Department announced that the world's largest economy grew at an annual 1.8 percent rate in the first three months of this year, undershooting economists' forecasts.

Weak consumer spending was largely attributed by economists for the poor first quarter results and the U.S. Labor Department announcing that claims for unemployment benefits rose surprisingly last week by 10,000 to 424,000, added to concerns about the recovery of the world's largest economy.

"People are feeling anxious about the outlook of the economy and corporate earnings," said Masaru Hamasaki, chief strategist at Toyota Asset Management Co.

The 225-issue Nikkei Stock Average lost 40.11 points from Thursday to 9,521.94, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange fell 2.18 points, or 0. 26 percent, to close at 824.90.

Sony Corp. was the biggest drag on the Nikkei Friday as the consumer electronic giant's shares dropped 3.2 percent to 2,167 yen, following the firm announcing a net profit that fell short of market expectations.

The company forecast profit of 80 billion yen (about 975 million U.S. dollars) for the current fiscal year, falling a long way short of analysts' median estimates for 110 billion yen.

Sony said that its TV business would likely continue to suffer in the face of stiff competition, causing price target cuts from a number of brokerages.

"Even for Sony, it's difficult to survive a competition in the field of high-tech and home electronics that's getting severer," said Hamasaki.

"The company was a leader in the industry but it has lacked distinguishing products lately," he added.

Other exporters lost ground on the last trading day of the week, with Sharp losing 3.0 yen to 724 yen and Olympus retreating 0.7 percent to 2,458 yen.

Japanese automakers were also among notable decliners Friday as eight of Japan's top makers announced today that auto production plummeted 60.1 percent from a year earlier in April, due to the debilitating affects of the March 11 disasters on output.

Toyota said domestic production plunged 78 percent, the largest decline since 1976 and Honda announced a drop of 81 percent. Nissan, for its part, said output dropped 49 percent on year in April.

Toyota subsequently closed down 0.6 percent at 3,335 yen, Honda lost 0.8 percent to 3,070 yen and Nissan skidded down 0.5 percent to finish the week at 796 yen.

Trading volume on Friday fell to 1.51 billion shares on the Tokyo Exchange's First Section, dropping from Thursday's volume of 1.61 billion shares, with declining issues trumping advancing ones by 956 to 544.

Source: Xinhua
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