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Nikkei falls on economy worry, mixed Wall St

Published 01/25/2011, 08:16 PM
Updated 01/25/2011, 08:19 PM
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* Nikkei loses 0.4 pct by midmorning

* Miners, smelters, traders down on worries over tightening

* Komatsu jumps on strong Q3 report, boosts optimism

By Antoni Slodkowski

TOKYO, Jan 26 (Reuters) - Japan's Nikkei average fell on Wednesday for the first time in three days as energy shares dragged the market down after an Indian interest rate hike and a contraction in Britain's economy fuelled concerns about economic growth and the effect of rising commodity prices.

Resource stocks took a hit after commodity markets felt pressure from concern that monetary tightening in India and China could continue as raw materials and food costs rise. The 19-commodity Reuters Jefferies CRB index fell more than 1 percent, heading for its largest one-day loss since Jan. 6.

But Komatsu Ltd jumped 1.9 percent to 2,473 yen after the Nikkei business daily said the construction machinery maker is expected to post better-than-expected results for the October-December quarter, keeping up the hopes for robust earnings by Japanese companies.

"Worries over monetary tightening will persist in the long term, weighing especially on shares of producers dependent on raw materials as their prices are still near all-time highs," said Masayuki Otani, chief market analyst at Securities Japan Inc.

Inpex Corp, Japan's top oil and gas developer, lost 2 percent to 516,000 yen. Shares of Mitsui Mining & Smelting shed 1.7 percent to 289 yen as copper prices backed away from record highs, hitting their lowest level in a month.

The mining industry was the worst performing sector on the Nikkei, losing 2 percent.

"Exporters are little changed today as traders await Obama's speech, which may impact exchange rates," Otani said.

President Barack Obama, seeking to assure Americans weary of 9.4 percent unemployment and fearful of rising debt, was to lay out his plan to reinvigorate economic growth in a State of the Union address at 0200 GMT, coinciding with the start of a midday break in Tokyo.

By midmorning the benchmark Nikkei was down 0.4 percent or 45.95 points at 10,417.99, slightly below the 10,420 level where its December futures and options prices settled.

The broader Topix index fell 0.3 percent to 926.09.

EISAI LEADS DECLINE

Shares of Eisai Ltd, Japan's fourth-largest drug company, fell 5.2 percent to 2,800 yen after it said late-stage trials for sepsis drug eritoran showed no reduction in mortality rates compared with a placebo.

The stock was the biggest faller on the Nikkei and most traded stock by turnover on the main board.

In contrast, Komatsu, the second-most actively traded share after Eisai, gained after the Nikkei business daily said it is projected to log an operating profit of about 220 billion yen ($2.68 billion) for the year to March 31, up roughly 230 percent from the previous year, partly on brisk sales of construction machinery in China.

Komatsu's gains boosted cautious optimism in the market ahead of earnings announcements by major Japanese companies this week but it will be the actual results and company guidance about long-term growth potential that will decide if the benchmark makes further substantial gains, investors said.

"Hopes for strong earnings are still there and we will see a lot of movement in the next two weeks in individual shares," said Kazuhiro Takahashi, general manager at Daiwa Securities Capital Markets

Exporters including Canon Inc and Kyocera Corp as well as Japan's biggest personal computer firm, NEC Corp, are due to report this week, setting the tone for the October-December earnings season that will last until early February. (Additional reporting by Chikafumi Hodo and Isabel Reynolds; Editing by Michael Watson)

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