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Nikkei edges lower as yen stands tall, but rangebound

Published 10/25/2010, 11:03 PM
Updated 10/25/2010, 11:08 PM

* Nikkei edges lower as yen stays near record high

* Japan earnings eyed, as well as UBS, Deutsche results

By Aiko Hayashi and Chikafumi Hodo

TOKYO, Oct 26 (Reuters) - Japan's Nikkei average edged lower on Tuesday as the yen stayed near a 15-year high against the dollar, but many investors were taking a wait-and-see stance towards the market as Japanese firms head into the peak of their earnings season.

The Nikkei moved in a narrow range with traders hesitant about taking fresh long positions after the yen firmed to a fresh 15-year peak of 80.41 against the dollar on Monday, approaching a record high of 79.75 yen.

"The market remains thin and rangebound today. As long as the yen's bullishness prevails, the Nikkei will be pressured," said Tomomi Yamashita, a fund manager at Shinkin Asset Management.

"The mood of the market is not too good. There are many investors showing selling interest, while there are only a few active buyers out there now," Yamashita said.

The benchmark Nikkei closed the morning session down 0.2 percent or 17.76 points at 9,383.40.

The broader Topix was down 0.3 percent to 819.03.

A slew of major Japanese companies report earnings this week, including Canon Inc on Wednesday and Sony Corp on Friday.

"The Nikkei is struggling to rise, but at the same time it is solid as we are seeing many good corporate results," said Ryosuke Okazaki, chief investment officer at ITC Investment Partners.

"Investors could start buying on dips if the Bank of Japan can come up with further measures to bolster the economy or if the market can be convinced that the yen's firmness will be limited around 80 (against the dollar)," Okazaki said.

The BOJ is scheduled to hold a policy meeting on Thursday following surprise credit easing measures earlier this month when it pledged to pump more liquidity to keep interest rates virtually at zero.

The market is also focusing on how European shares move after earning announcements by banks such as UBS later on Tuesday and Deutsche Bank AG on Wednesday, Shinkin Asset's Yamashita said.

The Nikkei is expected to be supported at last week's intraday lows of around 9,310-9,320, with the upper level of its daily Ichimoku cloud around 9,300 also seen as key technical support.

Some technical resistance is seen at the 25-day average, now at 9,497.

Traders said the market will seek direction from moves in the the dollar/yen rate.

"On the back of the strong yen, resource-linked shares and paper and pulp stocks are lending support to the overall market, but selling pressure dominates in shares of exporters," said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities

"Given the strength in the yen, investors have begun to worry that major companies will need to bring down their assumption rates for dollar/yen and the possibility that that would lead to downward revisions to their earnings outlooks," he continued.

The yen was little changed at 80.79 yen against the dollar in Asian morning trade.

The strength of the yen weighed on shares of exporting companies including Toyota Motor, which was down 0.9 percent at 2,867 yen.

Shares in Canon Marketing Japan, the domestic sales subsidiary of Canon Inc, fell 8.1 percent to 1,000, a day after the company cut its earnings forecast for the year to December to 7 billion yen ($87 million) from 8 billion yen.

Shares of Astellas Pharma dropped 1.1 percent to 3,025 yen after the Nikkei business daily said the drugmaker is expected to post a lower operating profit for the full year ending in March 2011, hurt by goodwill write-offs.

In contrast, GS Yuasa Corp, Japan's top car battery maker, rose 0.9 percent to 583 yen after it increased its net profit estimate for April-September to 2.5 billion yen from 1.5 billion yen, citing a strong performance from its overseas subsidiaries. ($1=80.80 yen) (Reporting by Chikafumi Hodo; Editing by Joseph Radford)

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