Nikkei likely to drift lower, eyes on China

TOKYO (Reuters) - Japan's Nikkei average is likely to drift lower on Thursday, with investors keeping an eye on other markets' reaction to news that Chinese authorities ordered some major banks to curb their lending over the rest of the month.

U.S. stocks slid on Wednesday and the Dow suffered its worst drop of 2010 due to fears that these curbs might jeopardize the global economic recover.

Analysts said investors could adopt a wait-and-see attitude ahead of the opening of Chinese share markets and economic data due out later in the morning, including GDP data, but that the bank lending issue itself would have only limited impact.

"A similar thing happened before, with markets getting nervous over the potential economic impact, but I think it's highly unlikely that something like this will really cool China's economy so much that it will have a bad impact on global growth," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.

"Still, investors may stay on the sidelines a bit until Shanghai opens."

Resource shares are likely to slip a bit after recent gains and on concern about China, while exporters could slip a bit after the yen gained some ground against the euro after worries about Greece's ability to finance its deficit pushed the euro to a five-month low against the dollar.

But the dollar was holding steady against the yen at 91.27 yen. Investors fret about a stronger yen because it eats into exporter profits when repatriated.

The benchmark Nikkei .N225 is likely to move between 10,600 and 10,800, market players said. Support will be solid around 10,600, just a little above the Nikkei's 25-day moving average, Yamagishi said.

In a sign that stocks may open slightly lower, Nikkei futures traded in Chicago closed at 10,690, down 0.2 percent from the Osaka close.

STOCKS TO WATCH

-- Seven & I Holdings (3382.T)

Seven & I Holdings is aiming for profit growth in the next financial year and may consider additional closures of department stores, the president of Japan's largest retailer said on Wednesday.

-- Sony Corp (6758.T)

Sony said on Wednesday it would delay the launch of a motion controller for its PlayStation 3 game console in the autumn of 2010.

-- Komatsu (6301.T), Hitachi Construction (6305.T)

Komatsu is likely to post an operating profit of around 16 billion yen for the Oct-Dec quarter, up 40 percent from the preceding quarter, bolstered by demand for infrastructure projects in developing nations, the Nikkei business daily said.

Hitachi Construction is likely to see its operating profit double to 6 billion yen, the Nikkei added, though it noted that operating profit for both firms is still lower than the same period the year before. (Reporting by Elaine Lies; Editing by Edwina Gibbs)