TOKYO, March 8 (Reuters) - Japan's Nikkei benchmark is expected to extend losses on Tuesday, with technology shares following their counterparts in the U.S. lower, while uncertainty over higher oil prices may trigger futures selling.
The Nasdaq composite index dropped 1.4 percent and closed just above its 50-day moving average on Monday, a widely followed technical level that if breached could signal more declines in the tech sector, which has helped lead the market rally.
Wells Fargo downgraded the semiconductor sector, noting its strong upward moves. The PHLX semiconductor index has risen 130 percent since March 2009.
Crude edged lower on Monday after hitting its highest since Sept. 2008 on conflict in the Middle East. Brent crude fell 0.8 percent to $115.20 a barrel.
"Mid-to-long-term investors dislike uncertainty, therefore they may stay on the sidelines for a while. Short-term investors may take daytime oil prices as cues and sell futures if oil prices rise," said Shinichiro Matsushita, a market analyst at Daiwa Securities.
Analysts also said that concern about higher oil prices looks to set to drive volatility in the futures market ahead of Nikkei 225 futures and options settlement on Friday.
"Commodity trading advisors may continue to be big players in the futures market," said Hiroichi Nishi, general manager at Nikko Cordial Securities.
Nikkei futures point to a lower start. They last traded in Chicago at 10,450, 80 points below their closing level in Osaka.
The benchmark Nikkei fell 1.8 percent, or 188.64 points, to 10,505.02 on Monday, dropping below immediate support of 10,537.09, the kijun line on its daily Ichimoku chart.
Analysts said that the Nikkei may trade between 10,350-10,550 on Tuesday.
The broader Topix index shed 1.5 percent to 941.63.
STOCKS TO WATCH
-- Hitachi Ltd
Hitachi said on Monday that it would sell its hard disk drive operations to Western Digital for about $4.3 billion in cash and stock.
-- Terumo Corp
Terumo said it would buy U.S. medical device company CaridianBCT from a Swedish firm for about $2.6 billion, marking the largest acquisition by a Japanese medical equipment maker.
--Tokyo Gas Co
Tokyo Gas said Monday that it has acquired a 1.25% stake in a liquefied natural gas project in Australia from British firm BG Group Plc, the Nikkei business daily said.
--NTT DoCoMo Inc
NTT DoCoMo intends to offer better applications and content for smartphones by next month combining its smartphone segment with an older division that handles such operations for its i-mode mobile Internet access service, the Nikkei business daily said.
--House Foods Corp
House is likely to log a group operating profit of more than 10.9 billion yen for the fiscal year ending this month, mostly level with fiscal 2009 but beating a prior outlook by some 600 million yen, the Nikkei business daily said. (Reporting by Ayai Tomisawa; Editing by Joseph Radford)