July 25, 2012 / 3:35 AM / 5 years ago

Nikkei skids towards year-lows as earnings offer little comfort

 * Toshiba down 7 pct: weak Apple earnings, production cut
 * Panasonic loses 5 pct, hits 32-year low
 * Fears that U.S. stimulus could hurt Japanese stocks
 * Defensives, pharmaceuticals put in modest gains
 By Sophie Knight
 TOKYO, July 25 (Reuters) - Japan's Nikkei share average slid
closer to its year-to-date low on Wednesday morning after
disappointing U.S. earnings reflected weakening demand in
Europe, while hints of more stimulus from the U.S. Fed failed to
soothe fears of a global slowdown.
 Panasonic Corp slammed into a 32-year low as tech
firms suffered deep losses, with Toshiba Corp skidding
7.3 percent on disappointing Apple results a day after
the Japanese firm announced plans to cut memory chip production
due to oversupply. 
 The Nikkei lost 1 percent to 8,402.92 before the midday
break, striking a fresh seven-week low and nudging closer to its
June 4 low of 8,295.63. The broader Topix also lost 1
percent to 710.60.
 "There's really nothing to support the market at the moment
and it looks l ike it w ill s ink right through June's lows without
any trouble," said Hiroyuki Mutsuro, head of execution support
at Mizuho Securities. "Demand has really cooled in Europe and
even firms that have done well on domestic consumption are going
to find it hard to maintain their share prices." 
  Apple's suppliers came under pressure after sales
of the technology bellwether's iPhone came in well under market
expectations, even taking into account consumers holding out for
the iPhone 5. 
  Murata Manufacturing Co Ltd, Foster Electric Co
Ltd, Ibiden Co Ltd, Seiko Epson Corp,
Taiyo Yuden Co Ltd were down between 2.5 and 5.7
 A defiantly strong yen against the euro, which held at 94.33
yen at the midday break, continued to weigh on exporters. Canon
Inc, a camera maker with high exposure to Europe due to
report earnings later on Wednesday, lost 1.7 percent to hit a
fresh 3-year low. 
  Euro zone concerns were exacerbated by rating agency
Moody's decision to change its outlook for Germany, the
Netherlands and Luxembourg to negative from stable as the
fallout from Europe's weaker southern nations cast a shadow on
the region's most robust economies. 
 "It's a message that if you share a monetary union with
broken economies like Spain's and Italy's then you will be
dragged down too," said Makoto Kikuchi, CEO of Myojo Asset
Management. "The uncertainty about when and how Germany will
confront the decision of whether to leave the euro is breeding a
risk-off atmosphere right now."
 Investors sought refuge in defensives, with the Topix's
pharmaceutical subindex gaining 1 percent after
Astellas Pharma Inc was boosted 2.9 percent by one of its
prostate cancer drugs being granted priority review status.
 Softbank Corp jumped 3.9 percent as the heaviest
traded stock on the main board after Bank of America Merrill
Lynch upgraded its rating on the mobile operator to 'buy' from
'neutral' saying it was the fastest growing among wireless
companies and its capex would decline the most in the next two
 Softbank has been one of the standout performers on the
Nikkei in the past six weeks, dipping only 0.4 percent so far in
July against the Nikkei's loss of 6.7 percent, after soaring
20.5 percent in June. 
 However, hopes that domestically oriented firms such as
Softbank might lend sufficient support to the Nikkei for a
recovery have petered out as the euro zone's debt crisis sends
investors scrambling towards the "safe haven" of the yen,
toppling exporters' share prices. 
 Market players are now downbeat about Japan's own earning
season, which kicks off in earnest later on Wednesday, with
Canon, Hitachi Construction Machinery, KDDI 
and Nintendo among those reporting after the bell.
 "I think that although individual stocks will be affected by
earnings it's unlikely to lend any support to the wider market.
Things have become quite tough," said Kenichi Hirano, operating
officer of Tachibana Securities. 
 An increasing number of market analysts see the Nikkei
slipping until it hits support around 8,100 or even 8,000. It is
down 3 percent on the week so far, after fears of a Spanish
bailout were sparked by heavily indebted region Valencia asking
Madrid for aid last Friday. 
 After being struck by fears that Spain might need a full
blown bailout, U.S. equities were given a last-minute leg-up on
Tuesday after the Wall Street Journal said Federal Reserve
officials were moving closer to steps to spur activity and
 However, the news was little comfort for investors in the
Japanese market.
 "The problem is that if they were to introduce QE3 (a third
round of quantitative easing) that would weaken the dollar,
thereby strengthening the yen, which is a bad thing for Japanese
stocks," said Kikuchi of Myojo Asset Management.

 (Editing by Sanjeev Miglani)
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