Nikkei set to fall, downgrade threat fans Europe worries

TOKYO Sun Dec 18, 2011 6:31pm EST

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TOKYO (Reuters) - Japan's Nikkei share average is likely to tread lower on Monday, as worries over the euro zone debt crisis heightened after Fitch Ratings warned of possible downgrades for seven European nations last week.

Nikkei futures in Chicago closed at 8,355, down 45 points from the Osaka close of 8,400. Market participants expect the benchmark to trade between 8,300 and 8,400 on Monday, below its 25-day average which is now a resistance point around 8,484.

Orders for Japanese stocks placed through nine foreign securities houses before the start of trade showed net sell orders of 3.5 million shares.

Fitch Ratings warned on Friday it may downgrade France and six other euro zone countries, saying a comprehensive solution to the region's debt crisis was "technically and politically beyond reach."

"Investors will remain cautious of Europe's sovereign debt problems and volume will remain thin on the Tokyo Stock Exchange as foreign investors leave ahead of the Christmas holiday," said Hiroichi Nishi, equity general manager at SMBC Nikko Securities.

Nishi said the Nikkei's fall would be limited as it will likely be supported by the Bank of Japan's buying of exchange-traded funds and bargain-hunting by pension funds.

The benchmark Nikkei .N225 ended up 0.3 percent at 8,401.72 on Friday, but marked a 1.6 percent loss on the week. The broader Topix index .TOPX slipped 0.2 percent to 723.56.

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STOCKS TO WATCH

-- Olympus (7733.T)

Tokyo police, prosecutors and the securities watchdog will likely launch a raid on the offices of disgraced Olympus Corp this week on suspicion the company falsified financial accounts, Kyodo News has reported, citing investigative sources.

--Toyota (7203.T)

Toyota Motor Corp is expected to produce 8.65 million units next year, fewer than it had initially told its suppliers to expect and is expected to finalize its 2012 production plans and notify major parts suppliers as early as this week, the Nikkei business daily reported.

--Daiichi Sankyo (4568.T)

European regulators recommended approval of a melanoma drug developed by Swiss Roche Holding AG (ROG.VX) and Daiichi Sankyo on Friday, which is expected to be formally endorsed by the European Commission in February.

--Japan Material (6055.T)

Japan Material Co Ltd, an electronics and graphics solution company, will make its debut on the Tokyo bourse on Monday, one of six companies that plan to list on the exchange this week.

(Reporting by Mari Saito)

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