Nikkei set to fall as sentiment sours on U.S. budget concerns

Tue Dec 4, 2012 6:27pm EST

TOKYO, Dec 5 (Reuters) - Japan's Nikkei share average is set
to extend the previous session's losses on Wednesday as investor
sentiment soured after Wall Street eased on concerns over the
U.S. budget tangle.
    U.S. legislators continue to negotiate a deal to avoid a
$600 billion package of tax hikes and federal spending cuts that
would begin Jan. 1 and could push the economy into recession.
     Optimism of progress was dented by remarks from President
Barack Obama, who rejected a Republican proposal to resolve the
crisis as "out of balance" and said any deal must include higher
tax rates for the wealthiest Americans.
   
    Analysts said the Nikkei was likely to trade between
9,350 and 9,450 on Wednesday, while Nikkei futures in Chicago closed at 9,405, down 25 points from the Osaka 
close of 9,430. 
  On Tuesday, the index ended 0.3 percent lower at 9,432.46
points.
    "A risk of profit-taking is rising as the dollar is
breaching a support level of 82 yen," said Yutaka Miura, a
senior technical analyst at Mizuho Securities. But he added that
ongoing hopes for more monetary easing in Japan should help
limit losses in the market.
    The currency was trading at 81.90 yen to the dollar on 
Wednesday, down from its 7-1/2-month low of 82.84 touched on
Nov. 22. A fall below the 82 yen threshold could trigger selling
in the equities market as a stronger yen cuts the value of
exporters' overseas incomes when repatriated.
    During the past three weeks, the Nikkei benchmark has
rallied 8.9 percent, led by exporters, and the yen has fallen on
speculation the Bank of Japan will be pushed to adopt aggressive
policy action after the Dec. 16 election. 
    The leader of the main opposition Liberal Democratic Party, 
Shinzo Abe, has been calling for the Bank of Japan to take 
bolder action, including setting a 2 percent inflation target 
and embarking on "unlimited easing". The LDP is expected to win 
the most seats and form the government after the election.
    The broader Topix index was flat at 781.97 on
Tuesday.

> Wall St dips as investors seek cliff progress           [ .N]
> Euro rises to near 7-week high vs dollar on Greece hopes 
> Bond prices rise on Fed buying but range holds          
> Gold hits one-month low on fund selling, technicals    
> Oil falls on U.S. budget, fuel demand concerns          
    STOCKS TO WATCH
    
    --Sharp Corp 
    Qualcomm Inc will invest as much as $120 million in
Sharp, a cash injection likely to make it the struggling
Japanese TV maker's biggest shareholder, and boost Sharp's
efforts to remain viable. 
    
    --Fast Retailing Co 
    Fast Retailing said on Tuesday that same-store sales at its
Uniqlo chain of clothing shops in Japan jumped 13.7 percent in
November from a year earlier due to strong sales of its down
jackets and winter underwear. 
    
    --Sony Corp 
    Sony aims to raise its capital ratio to at least 40 percent
in the year ending March 2015, the Nikkei reported, citing an
interview with Chief Financial Officer Masaru Kato.
 
    The struggling electronics giant intends to meet that goal,
which excludes financial operations, by amassing profits through
a recovery in its business performance, the Nikkei said. The
firm also hopes that 150 billion yen in convertible bonds it
issued last month will help lift its capital ratio from 27.1
percent as of the end of September as the bonds are turned into
stock, the Nikkei said.
    
    --Universal Entertainment Corp 
    Universal Entertainment on Tuesday sued Thomson Reuters and
three of its journalists for defamation over news articles
relating to millions of dollars in payments Universal made to an
ex-consultant to the Philippine gaming authority.
 
    
    --Sumitomo Chemical Co 
    Sumitomo Chemical may reconfigure or upgrade its sole
415,000 tonnes-per-year naphtha cracker in 2015 so that it
remains profitable in the face of shrinking domestic demand,
industry sources said.
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