(Adds Nikkei’s weekly, year-to-date moves, Mazda)
By Aiko Hayashi
TOKYO, Nov 2 (Reuters) - Japanese stocks posted a one-week closing low on Friday, snapping a two-day winning streak as bank shares such as Mitsubishi UFJ Financial Group (8306.T) tumbled after broker downgrades on U.S. banking giant Citigroup (C.N) sparked fears of further fallout from the credit crisis.
Exporters such as Canon Inc (7751.T) reversed course after investors picked them up the previous session on optimism about U.S. consumer spending.
On Thursday, Japanese stocks posted their highest close in two weeks as the Federal Reserve’s rate cut, surprisingly brisk U.S. economic growth data and a softer yen all boosted exporters.
Still, firms reporting solid earnings such as Konica Minolta Holdings Inc (4902.T) cast some light in Friday’s market gloom.
Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co Ltd, said Thursday’s optimism had receded but pessimism had not emerged, thanks largely to strong earnings both in the United States and Japan, indicating that the real economy was not deteriorating despite the financial problems.
“The market is in a state of shock right now after seeing a 300-point drop on Wall Street. After that, the market will try to determine how much the subprime problems have had a negative impact on the real economy,” he said.
“But the bright side to all this, as shown in today’s fall but not plunge in the market, is that investors have begun to see the real economy and the financial problems separately. Fairly good corporate earnings are also supporting the market.”
Hiroaki Kuramochi, managing director at Bear Stearns, said a stock sell-off accelerated towards the end of trade as investors began to worry that if U.S. jobs data due out overnight turned out to be bad, that would lead the yen to grow even stronger, limiting the market’s upside.
Economists expect the U.S. economy to have created 80,000 jobs in October after an increase of 110,000 in September. The employment rate is seen staying at 4.7 percent.
The benchmark Nikkei average .N225 dropped 2.1 percent or 352.92 points to end at 16,517.48, the lowest close since Oct. 26.
For the week, the Nikkei inched up 0.07 percent, but it is still below 4.1 percent so far this year.
The broader TOPIX index .TOPX shed 2.2 percent or 35.61 points to 1,600.17, also logging its lowest finish in a week.
The dollar was flat at 114.60 yen JPY=, pulling back from a session high just below 115 yen.
U.S. stocks tumbled on Thursday on renewed credit fears. CIBC World Markets cited concerns that Citi might have to cut its dividend or sell assets to boost capital, amid fears the bank could face further losses from subprime mortgage-related securities.
The news, which drove Citi’s shares down nearly 7 percent, coupled with disappointing earnings from Exxon Mobil (XOM.N), sent Wall Street’s three main indexes down more than 2 percent each. [ID:nN01480537]
After the market close, Mazda Motor Corp (7261.T) reported a 1.5 percent rise in quarterly operating profit as a weaker yen, cost cuts and robust sales in emerging markets offset a cutback in shipments to North America, and it kept its full-year profit forecasts unchanged. [ID:nT266511]
Bank shares were sold after their Wall Street peers tumbled.
Mitsubishi UFJ, Japan’s largest bank, plunged 6 percent to 1,052 yen, while No. 2 Mizuho Financial Group (8411.T) skidded 5.8 percent to 607,000 yen and Sumitomo Mitsui Financial Group (8316.T), Japan’s third-largest bank, lost 6 percent to 868,000 yen.
Exporters were also hit, with Canon down 2.7 percent at 5,800 yen and Honda Motor Co Ltd (7267.T) declining 3.9 percent to 4,210 yen.
But companies with solid earnings or profit prospects bucked the bearish market trend.
Konica Minolta jumped 5.9 percent to 2,160 yen after posting a 23 percent rise in half-yearly operating profit on robust sales of its multifunctional printers and flat TV components and raising its annual outlook to match market expectations. [ID:nT198684]
Shares of Brother Industries Ltd (6448.T) surged 11.3 percent to 1,747 yen after the printer and fax machine maker said on Thursday its group operating profit rose 68 percent in the July-September second quarter and it raised its full-year outlook.
Ibiden Co Ltd (4062.T) climbed 3.2 percent to 9,730 yen after the top maker of diesel particulate filters raised its full-year profit forecasts, helped by robust demand for parts for overseas mobile phone markets.
Trade was moderate, with 2.1 billion shares changing hands on the Tokyo exchange’s first section as opposed to last month’s daily average of 1.9 billion.
Declining stocks led advancers by a ratio of nearly six to one.