Nikkei falls as exporters and financials retreat; Italy vote uncertainty

Tue Feb 26, 2013 10:06pm EST

* Nikkei erases opening gains on selling in exporters, banks
    * Market cautious about uncertainty in Europe despite
positive local factors - analyst

    By Ayai Tomisawa
    TOKYO, Feb 27 (Reuters) - Japan's Nikkei share average
dropped on Wednesday, erasing earlier gains as selling in
exporters and financials partially offset hopes for continuing
U.S. Federal Reserve stimulus.
    The Nikkei dropped 0.8 percent to 11,310.45 by the
midday break after opening a tad higher. The index fell 2.3
percent on Tuesday on concerns an inconclusive election in Italy
could reignite the euro zone debt crisis, moving away from a
53-month high of 11,662.52 touched on Monday.
    U.S. stocks climbed on Tuesday as Federal Reserve Chairman
Ben Bernanke strongly defended the Fed's bond-buying stimulus,
easing worries that policymakers might be getting cold feet
about continuing the extraordinary measures to support the
economy.
    Analysts said trading may remain choppy as sentiment is
divided between bulls who want to chase the market higher on
ongoing hopes for monetary easing and those who are wary of the 
uncertainty in Europe. Investors are worried that renewed
problems in the euro zone could drive the safe-haven yen higher
and dent exporters. 
     "The Japanese market has been outperforming its global
peers since the beginning of this year. Although a weaker yen
has served as a tailwind to Japanese stocks, we were reminded
this week that the yen can still be bought as a safe haven
currency when fears emerged on European debt issues," said a
strategist at a European asset management firm.
    The dollar last traded at 91.77 yen, up from a
one-month low of 90.85 touched on Monday on worries that the
political deadlock in Italy could cause further instability in
debt-stricken Europe.
    "If the dollar holds above 90 yen, the market may not fall
sharply from the current line," the strategist said.
    The Nikkei has climbed 8.8 percent this year, while the
Standard & Poor's 500 Index has gained 5.0 percent and
the FTSEurofirst-300 index of top European shares has
only added 1.4 percent.
    While Japanese shares were supported by hopes the government
will nominate Asian Development Bank President Haruhiko Kuroda,
an advocate of monetary easing as its next central bank chief, a
correction may persist if the dollar hovers around the 92
yen-line, market observers said. 
    The yen, which has declined about 20 percent against the
dollar since November on Prime Minister Shinzo Abe's bold
reflationary policies, skidded to a 33-month low on Monday, with
the dollar reaching 94.77 yen.
    "Institutional investors are taking profits on automakers
and financials which have gained sharply. Retail investors'
selling on margin trade doesn't seem to have emerged yet, so
selling overall is not heavy," said Yasuo Sakuma, portfolio
manager at Bayview Asset Management. 
    On Wednesday, Toyota Motor Corp dropped 2.0
percent, Honda Motor Co shed 1.9 percent and Nissan
Motor Co fell 1.4 percent.
    Mitsubishi UFJ Financial Group fell 1.4 percent and
Sumitomo Mitsui Financial Group dropped 1.6 percent.
    Bucking the broad market, Jupiter Telecommunications Co
 surged 11 percent after KDDI Corp and
Sumitomo Corp raised the price of their tender offer to
buy the cable service operator by 12 percent to 123,000 yen per
share.
    The broader Topix dropped 0.7 percent to 959.58,
erasing earlier gains.
    "Even if there are negative factors from overseas continuing
to hurt sentiment, the Nikkei should be supported above its
25-day moving average (of 11,170) for the time being," said
Yutaka Miura, a senior technical analyst at Mizuho Securities.
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