Nikkei falls 1.92% on U.S. economic fears

20:31, June 25, 2010      

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Tokyo stocks extended losses Friday as mounting fears about the health of the U.S. economy and prospects for corporate earnings, coupled with a strengthening yen, sent investors fleeing from risky assets, sending the Nikkei average to a two-week closing low.

The 225-issue Nikkei Stock Average fell 190.86 points, or 1.92 percent, from Thursday to 9,737.48, the lowest closing level since June 11 and the broader Topix index of all First Section issues on the Tokyo Stock Exchange lost 12.47 points, or 1.42 percent, to close the week at 867.30.

Brokers pointed to concerns shifting from debt woes in the euro zone to reemerging concerns in the world's largest economy as Wall Street retreated overnight following worse-than-expected retailer earnings results, which sparked fears that a decline in consumer spending will darken the outlook for corporate earnings.

"The market seems to be gradually shifting its eyes from the debt problem in Greece and its impact on the financial system in Europe to the state of the U.S. economy," said Masatoshi Sato, senior strategist at Mizuho Investors Securities Co.

One local broker added that: "Investors had been aware that the speed of a recovery in the economy is rather slow but believed earnings are on a solid footing, but concerns are now emerging about the outlook for corporate earnings."

Market players, in addition, said Friday that all eyes were on the Group of Eight and Group of 20 summits in Canada this weekend, at which the leaders will discuss global economic vehicles to jump start the sluggish recovery in light of Europe's moves towards increased austerity plans and the U.S. dithering over the continuation of state stimulus measures.

With the U.S. dollar falling below the 89.50 yen mark, technology and export-related issues came under intense selling pressure encouraged by brokerage downgrades to some big-name blue- chips.

Tokyo Electron Ltd., the world's second-largest maker of semiconductor equipment, plunged 5.6 percent to 5,220 yen, the sharpest decline since Oct. 28, after Credit Suisse Group and Mizuho Securities Co. both lowered their equity ratings on the company to "neutral" from "outperform."

Memory chip-related firms were dealt similar blows, with Elpida Memory Inc. tumbling 8.4 percent to 1,401 yen and Dainippon Screen Manufacturing Co. Ltd. diving 8.7 percent to 432 yen, after Mizuho Securities cut both companies' ratings to "underperform."

Shares of Canon Inc. dropped 4.5 percent to 3,530 yen, following Credit Suisse cutting its rating on the stock to "underperform" from "neutral."

Financial issues performed well in early trade, but fortunes were later reversed following reports that the Basel Committee on Banking Supervision plans to soften new capital mandates for banks to protect against future financial collapse.

Subsequently, Mitsubishi UFJ Financial Group Inc. shed 0.5 percent to 419 yen and Sumitomo Mitsui Financial Group Inc. retreated 0.7 percent to 2,658 yen.

Mizuho Financial Group Inc., meanwhile, lost 1.3 percent to 153 yen, following a report in the Nikkei business daily that the firm has decided to raise up to 800 billion yen (8.93 billion U.S. dollars) via a common stock offering by the end of July.

Although the registration was made by Mizuho last month, no official decision had been announced.

On Friday some 1.88 billion shares changed hands on the Tokyo exchange's First section, up from Thursday's volume of 1.51 billion, with declining issues outnumbering advancing ones by 1, 243 to 322.

Source: Xinhua


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