Nikkei falls over 1 pct as global slowdown adds pressure
* Sharp Corp slides as investors impatient for Hon Hai deal * Steelmakers remain under pressure, wider losses forecast * Bernanke seen likely to stand pat on policy By Sophie Knight TOKYO, Aug 31 (Reuters) - Japanese shares slid to a two-week low by Friday's midday break as stocks related to China and resources remained under pressure, while Sharp Corp tumbled as investors grew impatient for Taiwan's Hon Hai Precision Industry to decide on a tie-up. Expectations of further stimulus measures from the U.S. Federal Reserve that investors hoped might bolster the slowing global economy also faded, prompting the Nikkei to break through its 25-day moving average at 8,930.54, as it dropped 1.1 percent to 8,884.21. "The whole market is coming under pressure -- the sense of uncertainty around Sharp's fate is the same as the unease around the market as a whole," said Kenichi Hirano, operating officer at Tachibana Securities. The Nikkei's 25-day moving average broke above its 250-day moving average to form a "golden cross", usually a bullish indicator. However, Hirano said that it could be a contrarian sign as the market is heading down and there are few incentives to buy. Sharp fell 9.3 percent after the chairman of Hon Hai left Japan on Thursday without announcing a deal to buy a bigger stake in the embattled consumer electronics maker. Expectations of such a deal had helped Sharp's share price soar as much as 44 percent between the intraday lows and highs of Aug. 22 and 29. "From a shareholders' perspective, they just want things decided ... Hon Hai might want a bigger stake, and maybe it's even their strategy to make negotiations break down so they can get it, but it's not clear," Hirano said. STEEL SECTOR SINKS Nippon Steel Corp dropped 3.8 percent and Sumitomo Metal Industries Ltd slipped 3.4 percent after both s widened their net loss forecasts for the six months ending Sept. 30, reflecting a strong yen and tough competition in the industry ahead of their merger, which will create the world's second-biggest steelmaker. Nippon Steel widened its net loss forecast to 155 billion yen ($2 billion) from the previous guidance of 85 billion yen, while Sumitomo Metal Industries revised its net loss forecast to 128 billion yen from a previous figure of just 8 billion yen. They added to a bearish outlook for the iron and steel sector, which dropped 2.7 percent as the worst performing sub-index on the main board after also falling 2.7 percent on Thursday, when iron ore prices hit a three-year low. The mining sector lost 2.6 percent. Running against the market was Towa Pharmaceutical Co Ltd , which put on 1.2 percent after J.P. Morgan lifted its price target on the drugmaker to 6,400 yen from 5,700 as the brokerage raised its earnings estimates due to Towa's strong performance up to the end of August. "If you're buying at the moment, domestic drugmakers are the way to go; many have high dividends and demand is strong," Hirano said. The pharmaceutical index outperformed the market with a gain of 0.2 percent. Yet, in another sign of the global slowdown, Japan's industrial output unexpectedly fell 1.2 percent in July, against a median forecast of a 1.7 percent increase predicted in a Reuters poll. The purchasing managers index for August also showed manufacturing activity in Japan at its lowest since the immediate aftermath of last year's earthquake. "China's role on the global economy can't be underestimated - it's clear that a slowdown there is hitting demand hard, along with a contraction in Europe," said Yoshihiro Ito, chief strategist at Okasan Online Securities. Fears of dwindling global demand prompted hopes the U.S. Federal Chairman Ben Bernanke would announce further stimulus in the form of a fresh round of bond purchases at a speech later on Friday in Jackson Hole, Wyoming, at an event used by Bernanke to introduce easier policy in the past two years. Those hopes, in addition to expectations that the European Central Bank would act to bring down soaring borrowing costs for Italy and Spain, drove the Nikkei up more than 10 percent from a seven-week low on July 25 to a three-and-a-half month peak on Aug. 20. The benchmark index is up 2.2 percent on the month, on track for its best August performance since 2006. However, expectations of easing faded on Thursday on the back of stronger-than-expected U.S. data, pushing the Nikkei to a two-week closing low. "The disappointment is weighing heavily on the market, but now investors are switching their attentions to the European Central Bank and whether they will start buying bonds to bring down Italy and Spain's borrowing rates," said Ito of Okasan Online Securities. "We could hope for a stronger euro to help Japanese exporters as it seems the yen isn't going to soften against the dollar," Ito added. The broader Topix sagged 1 percent to 736.23.
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