Nikkei slips as ECB disappoints; Sony, Sharp earnings drag

* Sharp slumps 28 pct, lowest close since 1976
* Sony sags 7 pct, lowest finish since 1980
* Fast Retailing up as July same-store sales beat
expectations

TOKYO, Aug 3 (Reuters) - Japan's Nikkei average fell on
Friday after the ECB disappointed investors by offering no
immediate action to prop up the euro, with wide quarterly losses
from Sharp and Sony adding to the gloom.
Both Sharp Corp and Sony Corp plummeted to
their lowest in more than three decades after posting heavy
losses and cutting their full-year profit outlooks.
The Nikkei dropped 1.1 percent to 8,555.11, breaking
below 8,581.97, the 61.8 percent retracement of its rally from
June 4 to July 4.
The benchmark index ended 0.1 percent down on the week after
ECB president Mario Draghi disappointed investors by not taking
imminent steps to defend the common currency, as Germany
remained opposed to the bank buying Italian and Spanish bonds.
"Unfortunately it wasn't a great surprise; the ECB is
paralyzed unless the euro zone politicians come to some kind of
consensus, and that's not going to happen for a while," said
Hideyuki Ishiguro, senior strategist at Okasan Securities.
"I can now see the Nikkei breaking through its year-to-date
low of 8,295 in the next few weeks, especially as earnings have
been absolutely terrible," he added.
Fifty-five percent of the 111 Nikkei companies that have so
far reported quarterly earnings missed market expectations, data
from Thomson Reuters StarMine showed. That compared with 40
percent in the previous quarterly earnings season.
Sharp dropped 28.1 percent to strike its lowest level since
1976, after the company changed its full-year outlook from a 20
billion yen ($256 million) profit to a 100 billion yen loss.

JPMorgan also downgraded the company's rating by two notches
to "underweight" and almost quartered its price target to 143
yen from 550.
Scores of investors dumped its shares, making it the most
traded stock on the main board, but it was difficult to short:
73.61 percent of the stock available to be borrowed was out on
loan as of August 1, according to data provider Markit.
Sony fared little better, losing 6.7 percent after posting a
year-on-year 77 percent decrease in the first quarter and
slashing its full-year operating profit forecast.

"There is no catalyst to buy both Sharp and Sony. In terms
of Sony, the gaming business, LCD TV and mobile phone (business)
are losing their competitiveness ... They have to restructure
and take the massive burden of restructuring costs," said Yasuo
Sakuma, portfolio manager at Bayview Asset Management.
Nippon Sheet Glass Co Ltd also added to investors'
gloom after it cut its full-year sales forecast by 5 percent due
to declining demand in Europe and "significantly
worse-than-expected" market conditions in the first quarter. The
stock sank 14.3 percent.
However, Toyota Motor Corp reported a quarterly
operating profit of 353 billion yen ($4.5 billion) after the
bell, beating the average estimate of 341.1 billion yen based on
eight analysts polled by Thomson Reuters I/B/E/S and compared
with a 108 billion yen loss a year earlier.
And smaller-than-expected decline in July sales at Uniqlo
clothing stores sent its operator Fast Retailing, an
index heavyweight, up 2.9 percent.

GOING LOCAL
As a strong yen, euro zone woes and signs of slowing growth
in the U.S. and China have eaten into earnings and forced a raft
of blue chips to cut their outlooks, small and mid- cap
companies with lower exposure to overseas markets remain in
favour.
"In contrast to foreign economies, Japan's economy is very
solid, very strong. Domestically-focused stocks are very strong,
and outperforming the market. I think this trend will continue
for the next couple of months," Sakuma of Bayview Asset
Management said.
One of those was Nihon Kohden Corp, a medical
equipment maker that rose 6.9 percent after hitting an intraday
52-week high as it hiked its operating income for the six months
ending in September by 14 percent due to better-than-expected
profit margins.
The broader Topix index lost 1.2 percent to 723.94,
and is now 0.6 percent down on the year.
Trading volume on the main board was robust, at 103.2
percent of its full daily average for the past 90 days, with
1.78 billion shares exchanging hands, the most for a week.
The Nikkei has now fallen 5 percent since hitting a
two-month high on July 4, and is just 1.9 percent up on the
year.
Investors are now looking to Friday's release of U.S.
employment data, an important measure of economic recovery in
the world's largest economy, to set the tone for next week's
trading.
Economists in a Reuters survey forecast predicted that
100,000 jobs were created in July in the United States, compared
to 80,000 jobs in June, while the unemployment rate is expected
to remain at June's level of 8.2 percent.
"The overwhelming message is that everyone is on holiday in
Europe in August and nothing is going to get fixed over there,"
said Norihiro Fujito, senior investment strategist at Mitsubishi
UFJ Morgan Stanley Securities.
"If U.S. payroll figures disappoint you can bet on this
sell-off continuing."