TOKYO Japan's Nikkei average slid on Friday to mark its ninth straight week of losses, the longest such run in 20 years, after disappointing Chinese and U.S. data deepened fears of a global slowdown in the throes of Europe's debt crisis.
Exporters were hurt by a double whammy of data suggesting slowing demand for their products and a strong yen, which rocketed to an 11-1/2 year high against the euro and stayed firm against the dollar as investors flocked to buy the safe-haven currency.
"The problem is that although Japanese stocks are technically cheap according to historical barometers, the market has always moved more on foreign factors than domestic ones," said Yutaka Miura, senior technical analyst at Mizuho Securities.
Canon Inc (7751.T), Mazda Motor Corp (7261.T), Nissan Motor Co (7201.T) and Sony Corp (6758.T) lost between 3 and 4 percent.
Stocks with high exposure to China sagged after its official purchasing index (PMI) fell to a year-to-date low of 50.4 in May, the latest indicator of slowing growth in the world's second-largest economy.
The figure came in well under the consensus of 52.2 expected by economists polled by Reuters, and down from 53.3 in April. Komatsu Ltd (6301.T) dropped 4.3 percent and Hitachi Construction Machinery Co Ltd (6305.T) lost 4.2 percent.
The Nikkei fell 1.2 and was down 1.6 percent on the week. On Thursday it logged a drop of 10.3 percent in May, its worst monthly performance in two years, dogged by signs of slowing growth and shrinking global demand. It has fallen 17.7 percent since hitting a one-year high on March 27.
Investors sought refuge in defensives, with telecoms firms benefiting. NTT DoCoMo (9437.T) put on 3 percent, while KDDI Corp (9433.T) gained 1.4 percent and Softbank Corp (9984.T) added 1.1 percent.
Yahoo Japan (4689.T) fell 3 percent after Barclays Capital said it faces slowing growth after years of steady profit expansion, and its "prospects remain unclear" despite a new management team bent on emphasizing its youth.
The broader Topix .TOPX lost 1.5 percent and the index ended down 1.8 percent on the week, on track for a ninth straight week of losses to mark its worst weekly losing streak since 1975.
"Many investors are watching the timing to enter the market. However, as long as the knife is falling, nobody can catch it," said Ryota Sakagami, chief strategist in equity research at SMBC Nikko Securities.
"The current problem is the tail risk from Europe ... However, (it's) different from last year," he said, adding that the U.S. economy was in better shape, but that investors had high expectations for its performance.
Yet the market was weighed on by U.S. data released overnight that showed an increase in jobless claims for the seventh week in eight and lower economic growth in the first quarter than expected. Investors were also waiting for payrolls data later on Friday, with economists polled by Reuters expecting unemployment to remain at 8.1 percent.
SINK OR SWIM?
The Nikkei was wallowing deep in "oversold" territory, with its 14-day relative strength index at 26.96, prompting hopes of a technical rebound or gains spurred by bargain-hunting. An RSI of under 30 is considered oversold.
If the Nikkei falls for a tenth week next week it will mark its worst string of weekly losses in 37 years, a plausible milestone as investors await the outcome of a June 17 Greek election that could push the country to leave the euro zone. Some market watchers were more optimistic, however.
"We've got a couple of weeks to go for short-covering to come in, but the more important factor is the banking system," said Eiji Kinouchi, chief technical analyst at Daiwa Capital Markets.
"When banks in Spain and the rest of Europe achieve their deleveraging targets this month or in July we should see lending grow, which will have a positive knock-on effect on the global economy."
European banks are required to ensure their capital buffers reach at least 9 percent by the middle of this year.
(Additional reporting by Dominic Lau; Editing by Eric Meijer)