Nikkei likely to fall, may test 9,800

TOKYO, June 16 (Reuters) - Japan's Nikkei stock average is
likely to fall on Tuesday after U.S. shares slid on weak regional
manufacturing data, with resource-linked shares seen under
pressure after a fall in commodity prices.

U.S. stocks tumbled on Monday, marking their worst slide in a
month, after the New York Fed's Empire State general business
conditions index showed the factory sector shrank at a much more
severe rate in June than the previous month.

The Standard & Poor's 500 Index .SPX fell 2.38 percent, and
the Dow Jones industrial average .DJI dropped 2.13 percent.

"Profit-taking is likely to be more prominent," said Yumi
Nishimura, deputy general manager at Daiwa Securities SMBC,
adding that the Nikkei could fall to as low as around 9,800 on
Tuesday.

But market players said a steeper sell-off was unlikely,
because the New York Fed's Empire State survey by itself was
unlikely to change investors' views that the pace of
deterioration in the U.S. and global economies was moderating.

The benchmark Nikkei .N225 closed at 10,039.67 on Monday,
down nearly 1 percent from an eight-month closing high of
10,135.82 on Friday.

In a sign the market may start lower, Nikkei futures traded
in Chicago 2NKc1 fell 1.4 percent from their Osaka close of
10,040 JNIc1.

Oil fell nearly 2 percent a barrel on Monday, extending its
retreat from a near eight-month high. [O/R]

The Bank of Japan is widely expected to keep interest rates
unchanged at 0.1 percent after a two-day policy meeting that ends
later on Tuesday.

But the BOJ may use less pessimistic wording to describe the
economy than it did last month, when it said things were
worsening. [ID:nT326522]

Nishimura at Daiwa Securities SMBC said the equities market
has likely factored in the possibility of the BOJ shifting
towards a less pessimistic view of the economy, and that any
impact from such a possible change was likely to be limited.
----------------------MARKET SNAPSHOT @ 2222 GMT ------------
INSTRUMENT LAST PCT CHG NET CHG
S&P 500 .SPX 923.72 -2.38% -22.490
USD/JPY JPY= 97.75 -0.09% -0.090
10-YR US TSY YLD US10YT=RR 3.7152 -- 0.000
SPOT GOLD XAU= 927.65 -0.02% -0.200
US CRUDE CLc1 70.48 -0.20% -0.140
DOW JONES .DJI 8612.13 -2.13% -187.13
-------------------------------------------------------------
> Wall St sees worst day in a month on resources, data [.N]
> Dollar rises, lifted by Russian comments [USD/]
> Bond prices rally as poor data drives safety bid [US/]
> Gold drops below $930 as dollar rallies [GOL/]
> Oil falls near 2 percent on firmer dollar [O/R]
STOCKS TO WATCH

-- Japan Tobacco (2914.T)

Japan Tobacco Inc, the world's third-largest tobacco firm,
said on Monday it is likely to hike its domestic cigarette prices
within the next three years to secure a profit amid a steadily
shrinking market.

There has been growing speculation that Japan Tobacco would
hike its cigarette prices for the first time since July 2006
after it set a target of keeping its core profit from its
domestic tobacco business steady for the three years through to
March 2012.

-- Sumitomo Mitsui Financial Group (8316.T)

Sumitomo Mitsui Financial Group, Japan's third-largest bank,
set its planned share sale at $9.4 billion on Monday, a record
for a Japanese financial firm and driven by the recent rebound in
global financial stocks.

Sumitomo Mitsui said it will raise 923.1 billion yen ($9.4
billion) by issuing new common shares, a record for a Japanese
financial firm, according to Thomson Reuters data.

-- Mitsubishi Materials Corp (5711.T)

Mitsubishi Materials is on track to complete repair work at
its Onahama copper smelter in early July, and resume operating
the facility at a higher rate, a company spokesman said on
Monday. [ID:nT29306]

-- Aiful Corp (8515.T) and Takefuji Corp (8564.T)

Ratings agency Standard and Poor's on Monday cut its ratings
on the long-term debt of Japanese consumer lenders Aiful Corp and
Takefuji Corp to speculative, or junk status, citing concern
about financing and credit costs.

Standard and Poor's said it cut its long-term senior
unsecured debt rating on Aiful by two notches to BB from BBB-,
and on Takefuji by one notch to BB+ from BBB-.
(Reporting by Masayuki Kitano; Editing by Chris Gallagher)