Nikkei set to fall, Greece fears keep investors on edge

TOKYO Mon May 14, 2012 7:43pm EDT

TOKYO (Reuters) - Japan's Nikkei share average is expected to fall on Tuesday after Greece's struggle to form a coalition on Monday pushed the country closer to a costly and tumultuous exit from the euro zone.

Market players said the Nikkei was likely to trade between 8,850 and 8,950 on Tuesday after Nikkei futures in Chicago closed at 8,865, down 1.2 percent from the close in Osaka of 9,970.

U.S. stocks fell overnight, with the S&P 500 closing at its lowest level since February after Greece's president failed to pull together a coalition in talks on Monday, increasing the likelihood of another election and the country's rejection of a 130-billion EU/IMF bailout. Talks will continue on Tuesday.

"With the concern about Europe's fiscal health, fundamental doubts about the strength of the global economy and the high yen, Japanese markets are likely to open down," said Hiroichi Nishi, equity general manager at SMBC Nikko Securities.

"But these factors have been pressuring the market for a while now, so prices have sunk. Buying on the dip might come in today."

The Nikkei .N225 closed up 0.2 percent at 8,973.94 on Monday, snapping a three-day losing streak after China cut bank reserve ratios by 50 points to 20 percent at the weekend. The move was welcomed by investors, but also signaled China's growth may slowing more than previously thought.

A stuttering recovery in the United States, shown by recent disappointing jobs figures, has also weighed on Japanese stocks, with some market participants worried that this year could be a repeat of 2011.

But Goldman Sachs said in a note on Monday that while a strong yen and wide credit spreads remain, the global and domestic economies are more resilient, profit outlooks are more positive and fiscal and monetary policy has been eased.

These differences could mean the broad Topix index .TOPX will kick back up to 900 or 970, the note said.

The Topix reached a year-to-date high of 872.42 on March 27, but has fallen 13.3 percent since, closing at 756.68 on Monday.

> S&P 500 down for 4th day of five, Groupon up late .N > Euro drops to near 4-month low on Greek deadlock <FRX/> > Europe, China worries push yields lower <US/> > Gold drops to 4-1/2-month low as euro sinks <GOL/> > Oil falls as Greece, China feed economic worry <O/R>

STOCKS TO WATCH

- SONY CORP (6758.T), PANASONIC CORP (6752.T)

Sony and Panasonic are in talks to jointly produce large OEL (organic electroluminescence) televisions, the Nikkei business daily said. The companies aim to release OEL TVs by fiscal 2015, according to the paper.

- NTT DOCOMO (9437.T)

NTT Docomo said it would bid for Italian mobile content and apps provider Buongiorno BVIT.MI in a deal worth up to 224 million euros ($290 million).

The telecoms company will offer 2 euros for each Buongiorno share through its German unit DOCOMO Deutschland, with the aim of merging it into the group.

- SHIN-ETSU CHEMICAL (4063.T)

Shin-Etsu Chemical Co will halve the amount of rare-earth metals used in its air conditioners to stabilize prices, the Nikkei business daily said.

The firm has a 20-30 percent share of the global market for high-performance magnets, according to the paper, and is hoping to reduce its dependence on rare-earth metal dysprosium, produced in China.

(Corrects NTT Docomo's stock code in Stocks to Watch)

(Reporting by Sophie Knight; Editing by Chris Gallagher)

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