Nikkei closes down 1.64% as U.S. recovery fears loom

Tokyo stocks retreated Friday with the key Nikkei stock index falling 1.64 pct as growing concerns about the U.S. economy's recovery and a strong yen negated the effect of upbeat domestic earnings.

On the final trading day of the week the 225-issue Nikkei Stock Average lost 158.72 points from Thursday to 9,537.30, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange was down 11.77 points, or 1.37 percent, to close at 849. 50.

Analysts said that James Bullard, president of the Federal Reserve Bank of St. Louis, expressing concern about deflation in the U.S. before the release of its gross domestic product data for the April-June quarter due later on Friday, caused Wall Street to slide and coupled with a strong yen unsettled investors.

"The markets moved in May and June mainly on concerns about Europe, but from here on the main driver is going to be U.S. economic indicators," said Masayoshi Okamoto, head of dealing at Jujiya Securities.

"Everything turns on what happens with the U.S. economy," he said.

Market players maintained that robust earnings from domestic firms were not enough to lift the market and that downward revisions to firms' forecasts may further stifle the market's ability to break its downturn below its 200 day moving average.

"Given the yen's rise, it seems inevitable that some downward revisions to forecasts may lie ahead, although this hasn't happened yet. So the overall uncertainty is preventing broader gains," said one local broker.

The yen rose to 86.25 against the U.S. dollar, the strongest level since December 1 and to 112.63 against the euro. Investors fret when the yen is strong as firms reliant on profits made overseas see their yields eroded when repatriated.

Brokers also added that this morning's news that industrial production in Japan had unexpectedly decreased 1.5 percent in June from a month earlier and consumer prices had dropped 1 percent in the same month, added to a pessimistic mood and increased concerns about the nation's persistent deflation issue.

Property developers declined on Q1 net incomes that failed to match the market's expectations with Mitsubishi Estate Co. dropping 4.1 percent to 1,218 yen.

Japan's second-biggest developer by sales said first-quarter net income fell 30 percent 6.77 billion yen (78.32 million U.S. dollars).

Fellow developer Mitsui Fudosan Co. retreated 3.9 percent to 1, 280 yen. Japan's biggest property developer said first-quarter net income slid 72 percent to 4.49 billion yen (51.94 billion U.S. dollars) as vacancy rates rose.

Renesas Electronics Corp. was another notable decliner sinking 3.6 percent to 826 yen, as Japan's second-largest chipmaker forecast a wider-than- expected net loss for this fiscal year after merging with NEC Electronics Corp. in April.

The firm said it expects the loss to be 80 billion yen (952.52 million U.S. dollars) for the 12 months ending March 31, compared with the average 55.4 billion yen (640.92 million U.S. dollars) estimated by economists. The company also plans to cut 10 percent of its workforce this business year.

But value leader Panasonic Corp. surged 6 percent to 1,142 yen, following a sharp sell-off the previous day on dilution fears following the company announcing it will make Sanyo Electric Co. and Panasonic Electric Works Co. wholly owned units next April, and issue up to 500 billion yen (5.78 billion U.S. dollars) in new shares to finance the deal.

Sony Corp. was another notable gainer, advancing 3.6 percent to 2,705 yen, as the consumer electronics maker raised its full-year earnings forecasts after sales of TVs helped the company post an unexpected profit last quarter.

Some 2.11 billion shares changed hands on the Tokyo exchange's First section, up from Thursday's volume of around 1.89 billion, with declining issues outnumbering advancing ones by 1,394 to 208.

Source: Xinhua