October 26, 2018 / 8:16 AM / 24 days ago

Japan shares suffer worst weekly fall in 8 months as worry on earnings mounts

* Nikkei, Topix post biggest weekly drop since early February

* Canon falls to lowest level since Feb 2017 on forecast cut

* Mazda Motor drops after media report on new NAFTA rules

By Hideyuki Sano and Ayai Tomisawa

TOKYO, Oct 26 (Reuters) - Japanese shares posted their biggest weekly loss in more than eight months on growing worries over earnings of domestic firms, with camera maker Canon disappointing the market by lowering its annual profit forecast.

The Nikkei share average on Friday fell 0.40 percent, taking the weekly loss of 5.7 percent as the index ended at 21,185, its lowest close since late March.

“The Nikkei is at a crucial point. The Nikkei could sustainably break below the average purchase cost of speculators since November 2016, which has worked as a bullet-proof support since then,” said Masanari Takada, cross asset strategist at Nomura Securities, noting that the level now was below 21,200.

If that happens, “speculators could close their long positions further or can even go short,” he said.

The broader Topix shed 0.31 percent to 1,596 on Friday to also end the week 5.7 percent down, the second biggest fall this year after a 7.1 percent drop in early February. It marked the lowest close since September 2017.

Canon Inc tumbled 5.6 percent to the lowest level since February 2017 after it cut its net profit forecast for the year ending December to 251 billion yen ($2.24 billion) from 280 billion yen, due to weak digital camera sales.

“If more companies report conservative forecasts, the outlook for Japanese shares will be clouded,” said Hikaru Sato, a senior technical analyst at Daiwa Securities.

Canon’s forecast revision came after a series of disappointing earnings from Japanese firms this week, raising worries the Sino-U.S. trade war may be starting to bite.

Daiwa’s Sato also said that the market is bracing for weaker U.S. shares indicated by falling U.S. futures after disappointing results on Thursday from tech giants Alphabet Inc and Amazon.com heightened concerns over world trade and economic growth.

But major Japanese carmakers staged a rebound after Thursday’s sell-off, shrugging off a report in the business daily Nikkei that the new U.S.-Mexico-Canada trade deal requires engines and six other components to be made in North America for cars to enjoy tariff-free access.

Toyota Motor rose 2.1 percent, while Honda Motor added 1.7 percent and Nissan Motor gained 1.1 percent.

But some midsize players, which the Nikkei said are likely to be affected the most, fared worse. Mazda Motor fell 1.7 percent.

$1 = 112.28 yen Editing by Richard Borsuk

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