October 24, 2012 / 7:01 AM / 6 years ago

Nikkei ends 7-day winning streak on poor U.S. earnings

* Investors see poor U.S. earnings as chance to take profits
    * Sharp rises on report to offer smartphone with Hon Hai
    * Gree, DeNA up after Facebook surprises on mobile revenue

    By Dominic Lau
    TOKYO, Oct 24 (Reuters) - Japan's Nikkei share average
snapped a seven-session winning streak on Wednesday as poor U.S.
earnings prompted investors to pocket gains on export-focused
firms, although better-than-expected Chinese manufacturing data
helped limit losses.
    Sharp Corp, however, bucked the downtrend after the
Nikkei business daily said the company had started selling a
smartphone in China developed in tandem with Taiwan's Hon Hai
Precision Industry. Sharp's shares surged 6.4 percent.
    The Nikkei fell 0.7 percent to 8,954.30, ending
below the key 9,000-mark after closing above that level in the
previous three sessions. The seven-session winning streak had
been the Nikkei's longest such run since July 2011.
    DuPont and United Technologies posted
disappointing quarterly results on Tuesday, raising concerns
about the impact of a global economic slowdown on earnings.
    Japan's export-oriented firms came under pressure after a
rally propelled by a softer yen over the past week and a half,
with automaker Honda Motor Co down 2.2 percent and
construction machinery maker Komatsu Ltd off 2.5
percent.
    "We can see this as a temporary, short-term adjustment,"
said Fumiyuki Nakanishi, manager of investment and research at
SMBC Friend Securities. "With the yen still soft and stocks at
highs after the rally, it's a very good moment for people to
take profits."
    The benchmark Nikkei pared early losses after data showed
Chinese output had reached a three-month high in October and
orders were their strongest since April, although growth
continued to shrink.
    The China HSBC Flash Manufacturing Purchasing Managers Index
hit 49.1, the highest level since July but below the 50-point
level separating expansion from contraction. 
    "This is a surprisingly good result considering the
worsening of trade relations between China and Japan since
September," said Masayuki Otani, chief market analyst at
Securities Japan, referring to a territorial spat between the
two countries over disputed islands.
    Weak earnings from Japanese companies also weighed on the
market, with the broader Topix down 0.8 percent at
743.27 in relatively active trade. About 1.78 billion shares
changed hands on the Topix, up fr o m Tuesday's 1.58 billion and
slightly ahead of last week's average of 1.77 billion.
    Although it is still early in the earnings season, seven out
of the eight Nikkei companies that have reported quarterly
results have missed market expectations, according to Thomson
Reuters StarMine. That compared with 54 percent in the previous
quarter.
    Among them was Chugai Pharmaceutical Co Ltd, which
fell 3.4 percent.
    
    OUTLOOK CUTS
    Kawasaki Heavy Industries sagged 5.7 percent after
the company almost halved its first-half operating profit
forecast to 10.3 billion yen ($129 million), citing
weaker-than-expected sales of precision equipment and
motorcycles due to a slowdown in China and Europe.
    JFE Holdings Inc, the country's No. 2 steelmaker,
on Wednesday cut its full-year profit forecast by half amid
worries that a delay in the Asian market recovery and the end of
government incentives for eco-friendly cars would sap demand and
prices. 
    But the stock closed up 0.1 percent, faring better than the
broader market, as "nothing bad really happened," a trader said.
    SMBC Friend's Nakanishi said: "Seeing as the market has now
recovered after a sell-off on doubts about earnings, it's
possible that it could fall sharply again as we start to see
actual earnings come out and people realise that it really is as
bad as expected."
    However, Wednesday's most-traded Nikkei index options were a
call with a strike price of 9,500, a 6.1 percent
upside from the current level, and a November maturity, Societe
Generale said.
    The next most-traded was a November put option at 8,000
, followed by another November put at 8,500
 and a November call at 9,250.
    Other noticeable gainers included Japanese social gaming
sites DeNA Co Ltd and Gree Inc, boosted after
Facebook Inc reported a sharp growth in mobile
advertising revenue during the third quarter.
    Gree advanced 3.3 percent and DeNA added 1.9 percent.
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