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Japan’s Nikkei average slumped below 13,700 for the first time in almost a month on Monday on the back of a strong yen and lacklustre earnings, while caution ahead of key market-moving events, including Chinese manufacturing data and a US Federal Reserve meeting, sidelined investors. The benchmark Nikkei fell 3.3 percent to 13,661.13, a level not seen since July 1, while the broader Topix dropped 3.3 percent to 1,128.45. All of its 33 sub-sectors finished the day in negative territory.
The market largely shrugged off news that Prime Minister Shinzo Abe has ordered a study of alternatives to a plan to double the sales tax to 10 percent. But traders said the possibility of the planned tax increase being delayed or watered down could negatively impact the equity market in the medium to long run. Toyota Motor Corp dropped 2.6 percent and was the most traded stock by turnover, while Honda Motor Co shed 2.1 percent and Sony Corp fell 2.2 percent after the dollar traded at a four-week low of 97.79 on Monday. A higher yen tends to make export-reliant Japan’s products less competitive in the global market, and lowers the profits when repatriated.
Analysts said that investors are reluctant to take positions before big events at home and abroad this week. “A sense of caution is looming in the market, especially because investors are worried about a slowdown in the Chinese economy. And when they see a risk in Asia, they tend to buy the yen, and the Japanese market is hit by that,” said Kyoya Okazawa, head of global equities at BNP Paribas, adding that the market is bracing for weak manufacturing data in China later this week.
A weak China PMI result will only heighten fears of a hard landing for the world’s second largest economy. China is Japan’s second major export market. In the United States, investors will scrutinise the Federal Open Market Committee policy statement this Wednesday for any additional clues about the Fed’s intended timeline for scaling back its quantitative easing. The market is also focused on jobs data to be released on Friday. Fanuc Corp bucked the broad market weakness and rose 3.3 percent despite a 36 percent fall in its operating profit for the April-June quarter as the figure was in line with market expectation, market participants said.
KDDI Corp, which is reporting its results on Tuesday, rose as much as 2.2 percent after the Nikkei newspaper said the mobile operator was expected to post a record-high April-June operating profit of around 160 billion yen ($1.6 billion), up 70 percent from a year ago. Nomura Securities said that 40 companies in the Russell/NOMURA Large Cap Index had released their first-quarter results as of July 26, equivalent to 14 percent of the total.
Sales at these companies rose 8.4 percent on year, while recurring profits rose 12.3 percent, Nomura said. “Although this is an extremely limited sample size, we note that FY12 Q4 results for the same universe showed sales growth of 5.5 percent and recurring profit growth of 2.9 percent. As such, there has been an upturn in both sales and profit momentum in FY13 Q1,” Nomura wrote in a report.
Copyright Reuters, 2013
Source Article from http://www.brecorder.com/market-data/stocks-a-bonds/0/1216426/
