Nikkei drops on Iraq worries; chip-related shares surge on Intel

Sun Jun 15, 2014 9:52pm EDT

* Semiconductor-related shares surge on Intel's bright
outlook
    * Rising oil prices cast concern on corporate profits -
analysts

    By Ayai Tomisawa
    TOKYO, June 16 (Reuters) - Japan's Nikkei share average
dropped on Monday morning as an insurgency in Iraq kept
investors on edge, while chip-related stocks outperformed on
Intel Corp's rosy outlook.
    The Nikkei fell 0.4 percent to 15,038.13 in
midmorning trade, moving away from a three-month high of 15,206
hit a week ago.
    The downside was partially offset by a strong performance in
chip-related firms. Advantest Corp gained 2.2 percent,
Tokyo Electron Ltd soared 2.6 percent and Sumco Corp
 surged 2.1 percent after Intel raised its full-year
revenue outlook, citing stronger-than-expected demand for
personal computers used by businesses. 
    On the whole, investors were generally cautious amid worries
geopolitical tensions in the Middle East and Ukraine could lead
to a protracted period of high commodity prices, and hurt
economic growth and companies' profits.
    "Investors aren't expecting material costs will rise soon
and will have an immediate impact on companies' profits, but
they are wary of these risks in the longer run," said Hikaru
Sato, a senior technical analyst at Daiwa Securities. "The
geopolitical concerns are lowering risk appetites." 
    Sunni insurgents seized a mainly ethnic Turkmen city in
northwestern Iraq on Sunday, solidifying their grip on the north
after a lightning offensive that threatens to dismember Iraq.
Meanwhile, the United States boosted security for its diplomatic
staff in Baghdad and said some staff had evacuated the embassy.
 
    Crude oil prices rose to new nine-month highs on Friday as
concerns persisted that the insurgency in Iraq could disrupt oil
exports from the second-largest OPEC producer. 
    Index heavy-weight stocks were weaker, with Fast Retailing
Co falling 1.8 percent, and Fanuc Corp 
shedding 1.3 percent.
    Exporters were mixed, with Toyota Motor Corp 
falling 0.2 percent, Sony Corp rising 1.2 percent and
Honda Motor Co dropping 0.8 percent.
    The broader Topix dropped 0.3 percent to 1,240.55,
while the JPX-Nikkei Index 400 declined 0.3 percent
to 11,286.36.
    

 (Editing by Shri Navaratnam)