Nikkei Index Drops on Earnings Worries

Devan Biswas
01 Nov, 2010
New York City

Stocks in Tokyo trading closed lower on the earnings worries and the prospect of the yen strengthening more. Currency traders are increasingly looking for the yen to strengthen another 7% before it stabilizes as the U.S. Fed is expected to stimulate the economy this week.

[R]4:30 PM Tokyo – Stocks in Tokyo trading closed lower on the earnings worries and the prospect of the yen strengthening more. Currency traders are increasingly looking for the yen to strengthen another 7% before it stabilizes as the U.S. Fed is expected to stimulate the economy this week.[/R]

Stocks in Tokyo trading closed lower as markets in Asia advanced. Weaker than expected earnings from Nomura and weak outlook from Honda played into the negative sentiment ahead of the U.S. Fed rate decision this week.

Nikkei 225 Stock Average declined 0.5% to 9,154.72 after losing gains in early trading.

Investors are increasingly factoring the prospect of additional U.S. Federal Reserve stimulus this week and the yen may strengthen another 7% in the next one month. The yen today closed at 80.22 to a dollar and the prospects of yen rising to 75 are increasingly discussed by traders.

Markets in Asia and China gained sharply on the back of positive data on manufacturing but the benchmark index in Tokyo dropped a fraction.

Manufacturing index tracked by China Federation of Logistics and Purchase and National Bureau of Statistics increased to 54.7 in October from 53.8 in September.

Wages in Japan in September increased and rose for the seventh month in a row. The wages gained 0.9% to 268,010 yen or $3,330 according to the latest data from the Labor Ministry.

The index tracking overtime wages in manufacturing declined 2.9% as the export led manufacturing rose at a the slowest pace in the year. However, the regular pay increased for the first time in nearly three years.

Stocks traded lower in Tokyo led by the weakness in banks, brokers and industrial exporters. Utilities retained positive bias.

Nomura Holdings dropped 5% to 397 yen after latest quarter net dropped 96% as international operations reported losses. Stronger yen also affected revenues in the international markets.

Sharp Corp declined for the second day in a row and fell 5.4% after it reported on Friday that quarterly net may drop as much as 40%.

IHI Corp declined 6% after the heavy machinery and equipment maker held its annual net outlook at 15 billion yen.

Honda declined more than 5% after it estimated full year net of 500 billion yen, sharply lower than what most analysts had factored at least 525 billion yen. The news dragged other automakers and exporters on the worries that the rising yen may crimp profit.

Panasonic Corp estimated 85 billion yen and All Nippon Airways estimated 6 billion yen