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Nikkei hits 7-wk closing low, recovery worries weigh

Published 07/09/2009, 02:50 AM
Updated 07/09/2009, 02:56 AM
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* Exporters hurt after yen hits 5-month high versus dollar

* Energy-linked stocks fall on oil's recent weakness

* But travel agency shares benefit from stronger yen

* Nikkei's 200-day MA looks to be forming support - analysts

By Aiko Hayashi

TOKYO, July 9 (Reuters) - Japan's Nikkei average fell to a seven-week closing low on Thursday, weighed down by exporters such as Canon as the yen stays near five-month highs against the dollar amid growing doubts about a speedy recovery in the global economy.

Energy-linked shares fell after oil prices dropped more than 4 percent on Wednesday on bearish oil data that underlined continued weak demand amid concerns about the economic recovery.

In a seven-day losing streak through Thursday, the Nikkei has lost 6.7 percent, though it remains more than 30 percent above its lows hit in March.

Market players said the 200-day moving average of around 8,800 appears to be forming a support level for the benchmark for now, compared with the Nikkei's current level around 9,300.

"Over-optimism about an economic recovery is being modified to neutral. The market has started examining the situation more calmly, though it hasn't turned pessimistic yet," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

"Considering the rally in global stock markets since March, what we are seeing is still within a correction as there are no further reasons to keep buying now."

Akino said risk-money that recently buoyed oil and other commodities is now pouring into the safety of bonds as investors mull their next move.

At one point on Thursday, the benchmark 10-year Japanese government bond yield fell as low as 1.270 percent, its lowest since March 25. Yields move inversely to prices.

In moderate trade, the Nikkei fell 1.4 percent or 129.69 points to 9,291.06, its lowest finish since May 22.

It ended at the day's low, though investors earlier took some comfort in the dollar's rebound above 93 yen on Thursday after it slid to a five-month low around 91.8 yen the previous day.

The broader Topix declined 1.7 percent to 873.91.

After U.S. aluminium giant Alcoa Inc reported a smaller-than-expected loss after the market close on Wednesday, corporate earnings season will become a major focus for the market, analysts said.

"Both the U.S. and Japanese markets are in a correction phase right now, and for further gains, investors need to see corporate earnings have been steadily improving," said Tsuyoshi Segawa, an equity strategist at Mizuho Securities.

YEN, DOUBTS ABOUT ECONOMIC RECOVERY WEIGH

Exporters fell as investors fret over a stronger yen, which eats into their profits' when they are repatriated.

Camera and office equipment maker Canon shed 1.5 percent to 2,940 yen and Toyota Motor Corp slipped 2 percent to 3,400 yen. Honda Motor Co dropped 2.7 percent to 2,325 yen.

But Mitsubishi Motors Corp inched up 0.6 percent to 162 yen after a newspaper said it and French carmaker Peugeot Citroen would work together to develop and produce parts for plug-in hybrid vehicles.

Oil refiner and distributor Cosmo Oil Corp declined 1.8 percent to 281 yen and Nippon Oil Corp, Japan's largest oil distributor, fell 1.6 percent to 485 yen. Oil and gas field developer Japan Petroleum Exploration lost 3.6 percent to 4,520 yen.

Shares of Clarion Co, a maker of car audio equipment, sank 7.9 percent to 82 yen after the Nikkei business daily said the company is expected to post an operating loss of about 2 billion yen for the April-June quarter due to sluggish domestic sales of automotive electronics.

Shippers rose on a brokerage upgrade, though they lost steam in afternoon trade. Nikko Citigroup lifted its rating on Mitsui O.S.K. Lines to "1M" from "2M", saying the stock looks undervalued, and upgraded Nippon Yusen KK to "2M" from "3M", saying it now looks appropriately valued.

Mitsui O.S.K. rose 0.5 percent to 558 yen, while Nippon Yusen dipped 0.3 percent to 393 yen, after rising as high as 406 yen at one stage.

Among stocks that benefited from the yen's rise, travel agencies such as H.I.S. Co Ltd and Kinki Nippon Tourist Co advanced as the stronger yen is expected to boost demand for travel abroad, market participants said.

H.I.S., a discount airline ticket vendor, surged 5.5 percent to 2,115 yen and Kinki Nippon Tourist, Japan's second-largest travel agency, rose 2 percent to 103 yen.

Some 2.1 billion shares changed hands on the Tokyo exchange's first section, in line with last week's daily average.

Declining stocks outnumbered advancing ones by more than 4 to 1. (Editing by Chris Gallagher)

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