TOKYO Japan's Nikkei share average is expected to open lower and fall below the psychologically important 9,000 mark on Thursday as concerns about the fragility of Spanish banks and political uncertainty in Greece dampen sentiment.
But a robust earnings forecast by Toyota Motor Corp (7203.T), Japan's top automaker, could help support the market.
Nikkei futures in Chicago closed at 8,990 on Wednesday, down 50 points or 0.6 percent from the Osaka close of 9,040.
"If risk-off sentiment strengthens in today's market, the Nikkei will go down below 9,000," said Takashi Hiroki, chief strategist at Monex Inc.
"There is no clear supporting line for the Nikkei. One of the supporting lines may be the 38.2 percent retracement of its rally from November to March at 8,945," he said.
But he said Toyota's results, announced after the bell on Wednesday, may offer support.
Of the 93 Nikkei companies that have reported January-March earnings so far, 60 percent of them have met or beat market expectations, Thomson Reuters StarMine data showed.
In Europe, investors retreated from riskier euro zone bonds, driving Spanish yields above 6 percent, on worries over how Spain's banks would meet government demands for a hefty recapitalization.
Spain will demand banks set aside another 35 billion euros ($45 billion) against loans to the ailing building sector, financial sources said. Massive bank losses have raised fears that the country may need an international bailout.
Strategists expect the Nikkei .N225 to trade between 8,950 and 9,100 after losing 1.5 percent on Wednesday to 9,045.06. That was its lowest close since February 13, a day before the Bank of Japan unexpectedly eased policy by expanding its asset purchase program to pull the economy out of deflation.
The BOJ's surprise move partly helped lift the Nikkei to a one-year high of 10,255.15 on March 27, but since then the benchmark has fallen 11.8 percent.
On Wednesday, the Japanese central bank bought 39.7 billion yen worth of exchange-traded funds to help support the market.
The broader Topix .TOPX dropped 1.4 percent to 765.83.
"We think the correction from March 27 is now in its final stages and the question is now the timing of the bottom," Nomura technical analyst Shoichiro Yamauchi said in a note.
Yamauchi said he expected May 14, May 25 or 28, and June 8 were among the possible days that the Nikkei could hit a trough.
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STOCKS TO WATCH
--TOYOTA MOTOR CORP (7203.T)
Toyota Motor expects to triple its operating profit this year to more than $12.5 billion - still less than half what it earned before the global financial crisis - as Japan's top automaker recovers lost ground in markets from the United States to China.
--TOKYO ELECTRIC POWER CO (9501.T)
Tokyo Electric Power Co, Japan's biggest utility and owner of the devastated Fukushima nuclear plant, will be taken over by the government after the country's trade minister on Wednesday approved a $12.5 billion capital injection.
--PANASONIC CORP (6752.T), ITOCHU CORP (8001.T)
Itochu and Panasonic will merge their mobile phone sales units before October to create the third largest mobile phone company in Japan, the Nikkei business daily said.
--KONICA MINOLTA HOLDINGS INC (4902.T)
Konica Minolta has agreed to buy the Japanese operations of Kinko's from FedEx Corp (FDX.N) for about 8 billion yen ($100.57 million), the Nikkei said.
--MITSUBISHI UFJ FINANCIAL GROUP (8306.T)
Mitsubishi UFJ's U.S. unit Union Bank said it would buy PNC Financial's (PNC.N) Smartstreet homeowners associations business, as the largest Japanese lender by assets looks to expand internationally.
(Reporting by Dominic Lau; Editing by Chris Gallagher)