Nikkei falls as euro-sensitive stocks weigh; caution over Japan-U.S. summit

Thu Feb 21, 2013 8:52pm EST

* Sony, Mazda fall on weak euro
    * Cautious mood over Japan-U.S. summit
    * Financials retreat after recent gains

    By Ayai Tomisawa
    TOKYO, Feb 22 (Reuters) - Japan's Nikkei share average fell
for a second day on Friday on worries about the U.S. and
euro-zone economies, dragging down euro-sensitive shares such as
Sony Corp.
    The Nikkei fell 1.0 percent to 11,195.55 in
mid-morning trade, retreating from a 52-month high of 11,510.52
hit on Wednesday.
    Investors were cautiously watching to see if the United
States backs Japan's plans to revive its economy, while 
uncertainty around this weekend's Italian elections also capped
demand. 
    "Investors are watching how the long-term interest rates,
CDS spreads and the euro will move after the election. Now that
the Nikkei has hit a new high and tested the 11,500-line
(earlier this week), the market is vulnerable to profit-taking
triggered by negative overseas factors," said Nobuhiko
Kuramochi, a strategist at Mizuho Securities.
    Exporters with high exposures to the euro zone economy
tumbled, with Mazda Motor Corp falling 3.4 percent and
Sony Corp shedding 3.2 percent after business activity
indexes dealt a blow to hopes the euro zone might emerge from
recession soon, showing the downturn across the region's
businesses unexpectedly grew worse this month. 
     Japanese Prime Minister Shinzo Abe meets U.S. President
Barack Obama in Washington on Friday, seeking to put a strong
alliance on display and looking for support for his economic
revival policies of big spending and hyper-easy monetary policy.
 
    "Investors will be watching headlines out of the meeting,
and they are highly sensitive to what they would mean to the
Japanese economy," said Hiroichi Nishi, an assistant general
manager at SMBC Nikko Securities.
    The broader Topix dropped 1.3 percent to 950.21.
    Financials, beneficiaries of Abe's reflationary policy, 
lost ground. Mizuho Financial Group dropped 3.0
percent, Mitsubishi UFJ Financial Group slipped 3.1
percent and Sumitomo Mitsui Financial Group fell 3.1
percent, being among five most traded stocks by turnover on the
board.
    Some of the bigger exporters were also sold off, with Toyota
Motor Corp falling 2.7 percent, Honda Motor Co 
dropping 1.7 percent and Nikon Corp shedding 2.5
percent.
     Nikko Securities' Nishi said that market sentiment was also
undermined by worries over how long the U.S. Federal Reserve
will keep its quantitative easing in place. In the United
States, a series of data from jobless claims to factory activity
and consumer price inflation pointed to slow economic growth and
supported the argument for the Fed to maintain its monetary
stimulus.
    Analysts said that most investors were also holding fire
until the nomination of a new Bank of Japan governor next week.
    The yen, which has lot more than 15 percent since November
on Abe's aggressive expansionary policies aimed at reflating the
economy, was steady on Friday. The currency was trading at 93.24
yen to the dollar, off its 33-month high of 94.47 tapped last
week.
    Against the euro, the yen rose to 122.25 yen, its
highest level since late January.
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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