Nikkei hits seven-week closing low, breaches key support
Sunday, 31 October 2010
TOKYO, Oct 30 (Reuters): Japan's Nikkei average fell 1.8 per cent to a seven-week closing low Friday as disappointing earnings hit shares of companies such as Sharp, with downward momentum accelerating after the index breached a key technical support level.
Investors were keen to lighten long positions ahead of the weekend and before a blizzard of earnings reports due after the close Friday and a highly anticipated Federal Reserve policy-setting meeting on Nov 2-3.
"I realise exporter shares are under pressure due to worries about a strong yen, but the Nikkei as a whole has also far lagged behind US and European shares," said Masaru Hamasaki, a senior strategist at Toyota Asset Management.
"The Nikkei will likely play catchup at some point and one catalyst may be the Fed's meeting, with eyes on whether it will decide on additional easing measures on a scale in line with market expectations."
The benchmark Nikkei ended down 163.58 points at 9,202.45, its lowest close since Sept 9, while the broader Topix slipped 0.4 per cent to 810.91.
Traders said foreign brokerages could be actively selling in the futures market on behalf of foreign hedge funds and other institutions.
Some said weak economic data also put a damper on investor confidence. Japanese factory output fell for the fourth straight month in September, the longest streak of declines in more than a year, adding to signs the economy is losing momentum as slowing export growth and a strong yen bite.
Hurt by worries about the strength of the yen and its impact on corporate earnings, the Nikkei shed 1.8 per cent in October, its biggest monthly fall since August. It fell 2.4 per cent on the week, also its worst weekly fall in two months.
So far this year, the Nikkei has lost nearly 13 per cent, while the Dow Jones industrial average has gained 6.6 per cent and Britain's FTSE 100 is up about 5 per cent.
In Asia trade, the yen advanced 0.5 percent to 80.64 to the dollar, coming closer to a 15-year high of 80.41 yen reached earlier in the week and a postwar historic high of 79.75 yen marked in April 1995.
Technical sentiment towards the Nikkei faltered as it dropped below the closely watched support of 9,300 for the first time since Sept 15, traders said, a day when share prices rose sharply after Japanese authorities intervened in the currency market for the first time in six years.
Around 9,300 is where a narrow band of both the upper and lower level of the Nikkei's daily Ichimoku cloud comes in.
Analysts said the Nikkei could now test 9,000, which was last broken on Sept 8, and then around 8,800, the index's low for the year.
"The Nikkei broke below the key support level of around 9,300, partly due to heavy sales of futures at the open, and technically more downward pressure now looks to be in store," said Yumi Nishimura, deputy general manager at Daiwa Securities Capital Markets.
Despite sharp falls in the overall market, investors were cautious about selling too aggressively head of a slew of results scheduled for later in the day.
Investors were keen to lighten long positions ahead of the weekend and before a blizzard of earnings reports due after the close Friday and a highly anticipated Federal Reserve policy-setting meeting on Nov 2-3.
"I realise exporter shares are under pressure due to worries about a strong yen, but the Nikkei as a whole has also far lagged behind US and European shares," said Masaru Hamasaki, a senior strategist at Toyota Asset Management.
"The Nikkei will likely play catchup at some point and one catalyst may be the Fed's meeting, with eyes on whether it will decide on additional easing measures on a scale in line with market expectations."
The benchmark Nikkei ended down 163.58 points at 9,202.45, its lowest close since Sept 9, while the broader Topix slipped 0.4 per cent to 810.91.
Traders said foreign brokerages could be actively selling in the futures market on behalf of foreign hedge funds and other institutions.
Some said weak economic data also put a damper on investor confidence. Japanese factory output fell for the fourth straight month in September, the longest streak of declines in more than a year, adding to signs the economy is losing momentum as slowing export growth and a strong yen bite.
Hurt by worries about the strength of the yen and its impact on corporate earnings, the Nikkei shed 1.8 per cent in October, its biggest monthly fall since August. It fell 2.4 per cent on the week, also its worst weekly fall in two months.
So far this year, the Nikkei has lost nearly 13 per cent, while the Dow Jones industrial average has gained 6.6 per cent and Britain's FTSE 100 is up about 5 per cent.
In Asia trade, the yen advanced 0.5 percent to 80.64 to the dollar, coming closer to a 15-year high of 80.41 yen reached earlier in the week and a postwar historic high of 79.75 yen marked in April 1995.
Technical sentiment towards the Nikkei faltered as it dropped below the closely watched support of 9,300 for the first time since Sept 15, traders said, a day when share prices rose sharply after Japanese authorities intervened in the currency market for the first time in six years.
Around 9,300 is where a narrow band of both the upper and lower level of the Nikkei's daily Ichimoku cloud comes in.
Analysts said the Nikkei could now test 9,000, which was last broken on Sept 8, and then around 8,800, the index's low for the year.
"The Nikkei broke below the key support level of around 9,300, partly due to heavy sales of futures at the open, and technically more downward pressure now looks to be in store," said Yumi Nishimura, deputy general manager at Daiwa Securities Capital Markets.
Despite sharp falls in the overall market, investors were cautious about selling too aggressively head of a slew of results scheduled for later in the day.