Nikkei slips on profit-taking, eyeing earnings

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By Elaine Lies

TOKYO, May 1 (Reuters) - Japan's Nikkei stock average shed 0.7 percent on Thursday as investors moved to lock in profits after the Federal Reserve left unclear the outlook for further rate cuts, with banks such as Mizuho Financial Group (8411.T) slipping after several days of strong gains.

The market was zeroing in on earnings, pushing up firms like Komatsu Ltd (6301.T) after the world's No. 2 maker of earth-moving equipment on Wednesday booked a 4 percent gain in quarterly profit and forecast 5 percent growth this year on strong demand for construction in China. [ID:nT1793]

Investors were struggling to interpret the decision by the Federal Reserve, which cut interest rates by the predicted 25 basis points but failed to deliver an unequivocal statement that the worst was over for the economy.

"They couldn't be clear in their statement, this isn't the time to be clear," said Hiroaki Osakabe, fund manager at Chibagin Asset Management.

"There are still question marks about the economy so they decided to take a neutral stance."

Others pointed to better-than-expected U.S. GDP figures as a sign that concerns about the economy might be exaggerated, noting that the market was more likely simply searching for direction with many world markets closed for a holiday on Thursday.

With an extended holiday approaching in Japan and key U.S. April jobs data due out on Friday, market players were averse to taking on fresh positions, leading to profit-taking, said Mitsushige Akino, chief fund manager at Ichiyoshi Investments.

In addition, a sense appeared to be growing among investors that any break over 14,000 by the Nikkei -- a level it briefly touched on Monday for the first time in two months -- is unlikely without strong, fresh positive factors.

"Nothing in the environment's really changed since yesterday, and I don't think you can say the Fed decision is having a strong direct impact. There's really just no reason to buy," Akino added.

The Nikkei .N225 lost 93.14 points to 13,756.85, while the broader Topix was down 0.9 percent at 1,346.45.

BANKS, PROPERTY FIRMS SLIDE

One exception to the market's focus on earnings were banks, which market players said were moving mainly on sentiment as profit-taking kicked in, with property firms moving in tandem.

Mizuho Financial fell 4.1 percent to 518,000 yen, while top lender Mitsubishi UFJ Financial Group (8306.T) fell 3.2 percent to 1,108 yen. Sumitomo Mitsui Financial Group (8316.T) was down 2.7 percent at 871,000 yen.

Mitsubishi Estate Co Ltd (8802.T), Japan's second-biggest developer, forecast on Wednesday 10 percent annual operating profit growth, bolstered by tight supply of prime office space in Tokyo and the consolidation of two units onto its books [ID:nT344923].