October 11, 2012 / 1:35 AM / 5 years ago

Nikkei falls on earnings fears, heading for 3rd day of losses

* Car parts maker Tokai Rika sags after Toyota recall
    * Shin-Etsu Chemical rises after Nomura upgrade

    By Dominic Lau
    TOKYO, Oct 11 (Reuters) - Japan's Nikkei average fell to its
lowest in two months on Thursday, losing ground for a third
straight day on mounting concerns that upcoming quarterly
corporate earnings will be weak after the U.S. results season
got off a slow start.
    The Nikkei eased 0.4 percent to 8,559.78. At one
point, it fell as low as 8,514.63. The benchmark has fallen 7.8
percent since hitting a four-month high on Sept. 19.
    Ryota Sakagami, chief equity strategist at SMBC Nikko
Securities said market participants were worried that this
earnings season was set to yield a slew of cuts to annual
forecasts, as well as some negative surprises.
    "However, if you look at the current prices of individual
companies, they should have priced in downward revisions. The
market is overreacting," he said, but added that the Nikkei
could fall as low as 8,250 in a worst case scenario. 
    SmartEstimates from Thomson Reuters StarMine show
expectations for an average negative earnings surprise from
Nikkei 225 companies of 1.3 percent for July-September quarterly
    The benchmark Nikkei is up 1.2 percent so far this year,
trailing a 13.9 percent rise in the S&P 500 and a 9.9 percent
gain in the pan-European STOXX Europe 600 index. 
    On Wednesday, the U.S. S&P 500 fell for a fourth day
after Chevron said third-quarter profits would be "substantially
lower" than the previous quarter and Alcoa posted a quarterly
loss and cut its outlook for global aluminum demand.
    Japanese automakers and parts suppliers were under pressure
after Toyota Motor Corp said it would recall more than
7.4 million vehicles worldwide for faulty power window switches.
    The sector was already faced with concerns over the impact
of sluggish global growth and anti-Japanese sentiment in China
over a territorial dispute between the two countries.
    Car parts maker Tokai Rika Co Ltd slumped 8.8
percent after the recall by Toyota, which lost 1.7 percent, in
line with a 1.8 percent fall in rival Nissan Motor Co.
    The broader Topix index slipped 0.3 percent to
   Gainers included Shin-Etsu Chemical Co Ltd, which 
climbed 2.3 percent after Nomura upgraded its rating on the
company to 'buy' from 'neutral' and lifted its price target.

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