Friday, August 21, 2009

Stocks in Japan End Lower - Slipped 1.4 Percent

. Friday, August 21, 2009

By stockOzone team

Japan’s Nikkei average slipped 1.4 percent on Friday, with Toyota Motor and other automakers skidding on news that the United States will end its cash-for-clunkers rebate program soon.

Market players said stocks extended losses in the afternoon due to a stronger yen, which curbs exporters’ profits, and weakness in Hong Kong’s Hang Seng Index as investors nervously watch moves in Chinese stocks for cues.

“Uncertainty about the direction of the Chinese stock market and news of the end of the U.S. auto incentive program are bringing down the market,” said Masaru Hamasaki, a senior strategist at Toyota Asset Management.

“The news of the end of the program came as a surprise and sparked concerns about a drop in sales as a result. That’s negative for auto stocks.”

In moderate trade the benchmark Nikkei shed 145.21 points to 10,238.20, after briefly falling as far as 10,142.22, its lowest point since July 30. It gave up 3.4 percent on the week.

The broader Topix slipped 1.2 percent to 947.34.

The Hang Seng Index slipped closed down 0.6 percent, while the Shanghai Composite Index added 1.7 percent. After several swings of more than 4 percent this week that unnerved investors, the Shanghai index ended the week down 2.8 percent.

China’s leading index has lost around 15 percent in about two weeks, spooking investors who are trying to gauge how China’s revival is playing out while wrestling with continued mixed signals on recovery prospects in major Western economies.

European shares opened modestly lower on Friday amid growing volatility, trimming the previous session’s gains, with resource-related shares expected to be hit by retreating commodity prices as the fickle Chinese market prompts investors to switch out of riskier assets.

U.S. stock futures fell 0.4 percent.

Investors were also cautious ahead of Japan’s national election on Aug. 30.

Newspapers including the Nikkei business daily are predicting that the opposition Democratic Party could be headed for a landslide victory, trouncing the conservative party that has ruled for most of the past half-century.

“A landslide victory by the Democrats has started to sound more realistic, and that is leading investors to close positions for now,” said Fumiyuki Nakanishi, manager at SMBC Friend Securities.

Automakers lost ground after the U.S. government said it will suspend its cash for clunkers auto rebates on Monday as the program’s $3 billion budget runs dry, a month after it was launched.

The program has provided a big temporary boost for both the deeply troubled auto industry and the battered U.S. economy.

Toyota Motor slid 2.9 percent to 3,980 yen, while Honda Motor dropped 4.1 percent to 2,955 yen and Nissan Motor lost 5.2 percent to 677 yen.

The dollar fell 0.5 percent to 93.71 yen, which hit exporters.

Canon declined 1.1 percent to 3,500 yen and Sony fell 1.4 percent to 2,445 yen. Kyocera slipped 1 percent to 7,320 yen.

Among stocks that gained, Fujitsu gained 1 percent to 625 yen after it said it sold most of its shares in industrial robot maker Fanuc for 89 billion yen ($945 million), and it revised its 6-month net earnings forecast to a profit from a loss.

Fanuc slipped 1.7 percent to 7,330 yen.

The yen rose broadly against other major currencies, particularly those leveraged to a global growth recovery, as investors fretted about the potential for further weakness in Chinese shares and looked to less-risky investments. The Japanese currency is often seen as a haven in times of market turmoil.

“Anything that could be negative for growth in China is going to have a negative impact on equity markets and in turn means higher risk aversion and risk currencies sell-off,” said Mitul Kotecha, global head of FX strategy at Calyon in Hong Kong.

The dollar fell to as low as 93.47 yen on trading platform EBS, its lowest in a month, but later edged up to 93.69 yen, down 0.5 percent.

The Australian dollar slid 1.4 percent to 77.23 yen after falling as low as percent to 76.86 yen

Sentiment toward the Australian dollar was hurt after ratings agency Moody’s Investors Service repeated its concerns about the deteriorating financial position of many of Australia’s states and said downgrades could not be ruled out.

U.S. crude futures initially edged up to a seven-week high above $73 a barrel but then slipped below that level as optimism over the pace of demand recovery in the United States faded on the back of mixed economic data.

Japanese government bonds advanced, with futures hitting a five-month high of 139.36 after gains in U.S. Treasury debt prices in New York and the drop in Tokyo stocks, but closed at 139.20.

U.S. Treasury futures climbed in Asia, with Treasury note futures hitting a more than one-month high before edging down.

Disclosure: Author does not own any of the stocks discussed here.

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