Nikkei turns negative, may drop for 7th straight day

Tue Nov 13, 2012 3:16am GMT

* Nikkei may head into 7-day loss
    * Hitachi Cable up on merger report
    * Construction shares lower on outlook cuts

    By Ayai Tomisawa
    TOKYO, Nov 13 (Reuters) - Japan's Nikkei share average eased
on Tuesday, giving up earlier gains, and may end lower for a
seventh consecutive day as investors worry that a U.S. fiscal
policy standoff could push the country into recession.
    By the midday break, the Nikkei dropped 0.3 percent
to 8,647.28 Points, and the broader Topix shed 0.3
percent to 720.27.
     "Investors are risk averse as they worry that issues about
the U.S. fiscal cliff may not reach a conclusion soon," said
Eiji Kinouchi, chief technical analyst at Daiwa Securities.
"While investors are looking for trading cues, U.S. futures are
trading lower, and it's difficult to hold their sentiment
positive."
    S&P 500 futures traded 0.4 percent lower.
    The U.S. "fiscal cliff" - a series of budget cuts and tax
hikes that will start to go into effect in the new year - have
made investors cautious because of the potential for harm to
U.S. and global economic growth.
    Amid a global fright over Washington's political
brinkmanship, U.S. lawmakers return to the capital on Tuesday
with a seven-week deadline to reach agreement on scheduled tax
hikes and budget cuts. 
    Market players in Tokyo said that the Nikkei may end lower
for a seventh straight session on Tuesday, but drops may be
limited, with a technical support level seen at 8,635.
    "The Nikkei's once-support lines have become its resistance
lines now," said Kenichi Hirano, a strategist at Tachibana
Securities, adding that investors may chase the market higher
for the next few days to cover their short positions, but stay
on the sidelines when the Nikkei nears 8,850.
    Its 25-day moving average is at 8,851, while its 75-day
moving average is at 8,897. 
    "But at the same time, there are signs that the U.S. economy
is recovering, and if upcoming U.S. data gives hope to the
market we may see more rises as the underlying worries are
whether the U.S. economy is recovering or not," said Takashi
Ito, equity market strategist at Nomura Securities.
    He said that fiscal problems in Europe were seen as more
serious, as they will only be solved in the long term.
    "As long as Greece's default can be stopped, the market may
not react too wildly. Greece's problem is like a disease which
cannot be cured right away but needs to be monitored not to get
worse."
    Euro zone finance ministers gathered in Brussels did not
agree to disburse more money to Greece on Monday, as expected.
The euro zone and the International Monetary Fund clashed over a
longer-term target date to shrink the country's debt pile, but
Greece's international lenders agreed to give the country two
more years to make the cuts demanded of it. 
   European Union officials said euro zone finance ministers
will meet again on Nov. 20 to discuss Greece. 
    The benchmark Nikkei is up 2.3 percent this year, trailing a
9.7 percent gain in the U.S. S&P 500 and a 10.2 percent
rise in the pan-European STOXX Europe 600.
    Japanese equities carry a 12-month forward price-to-book
ratio of 0.83, much cheaper than the S&P 500's 1.9 and STOXX
Europe 600's 1.38, data from Thomson Reuters Datastream showed.
    Hitachi Cable Ltd jumped 18 percent to 126 yen,
hitting a three-month high after a source told Reuters that it
and Hitachi Metals Ltd plan to merge in April, creating
a materials producer with businesses ranging from automotive and
electronic parts to fibre optics. 
    Construction shares were lower, with Shimizu Corp 
shedding 5.4 percent to 226 yen, hitting a 12-year low after the
general contractor cut its annual operating profit forecast by
one-third to 14.5 billion yen, citing higher than expected
project costs and slower-than-expected improvement in margins.
    Taisei Corp dropped 3.4 percent to 201 yen after
the contractor cut its full-year net profit outlook for the year
ending March.