TOKYO, June 25 (Reuters) – Japan’s Nikkei average extended falls on Friday for its biggest weekly loss in a month, closing below a key support level in what market players said could signal still more drops to come.
Fresh signs of weakness in U.S. consumer spending that have raised concerns about the outlook for corporate earnings sparked much of the selling.
The Nikkei shed 1.9 percent on Friday and 2.6 percent for the week to close below its 25-day moving average, a proxy for a one-month moving average that is keenly watched in Japan.
Support lies near a six-month low hit this month around 9,400. But on weekly charts, the Nikkei’s 13-week moving average has crossed below the 26-week moving average — a formation known as a “death cross.”
“The feeling in the market really isn’t very good right now, and if we don’t get something encouraging out of the G20 summit we could see more falls next week,” said Noritsugu Hirakawa, a strategist at Okasan Securities.
“With the G20 summit going on it’s very hard to buy, and the yen’s gains are adding some downward pressure.”
Leaders of the Group of Eight and Group of 20 rich and developing nations meet in Canada June 25 to 27 to discuss how to plot the world’s emergence from the worst financial crisis since the Great Depression. [ID:nN18322198]
Shares of Mizuho Financial Group (8411.T) hit a seven-month low after sources told Reuters the bank will decide on Friday to sell up to 6 billion new shares in a planned global offering, increasing the total number of shares outstanding by up to 38 percent. [ID:nTOE65O032]
The benchmark Nikkei .N225 shed 190.86 points to 9,737.48, its lowest close in two weeks. The broader Topix slipped 1.4 percent to 867.30.
“Investors had been aware that the speed of a recovery in the economy is rather slow but believed earnings are on a solid footing, but concerns are now emerging about the outlook for corporate earnings,” said Kenichi Hirano, operating officer at Tachibana Securities.
The technical picture has darkened for the Nikkei, with its MACD turning downwards after a sustained rise. Its slow stochastic, which gives near-term signals on market trends, shows the drop may yet have further to go as well.
The S&P 500 fell on Thursday for a fourth straight day, losing nearly 4 percent over the four sessions, with retailers among the biggest decliners a day after discouraging outlooks from Bed Bath & Beyond (BBBY.O) and athletic apparel maker Nike Inc (NKE.N) [ID:nN23235380]
On Friday, orders for Japanese stocks placed through 10 foreign securities houses before the start of trade showed net selling for a fourth straight day, although market players said foreign investor activity appeared to have ebbed later.
“I think a lot of foreign investors have closed their positions as the quarter-end nears,” said Okasan’s Hirakawa.
Shares of blue-chip exporters fell to drag down the broader market, with several major names hit by brokerage downgrades.
Shares of Canon (7751.T) lost 4.5 percent to 3,530 yen after Credit Suisse cut its rating on the stock to “underperform” from “neutral.”
The brokerage also cut its rating on Tokyo Electron (8035.T) to “neutral” from “outperform” and lowered the target price, saying the order recovery cycle for 2010-11 semiconductor capex is likely approaching a peak. Tokyo Electron lost 5.6 percent.
Large Japanese banks gained in early trade after a Financial Times report that the Basel Committee is set to relax its proposals on how much capital banks must set aside to protect against future financial crises, but by afternoon had reversed course. [ID:nLDE65N2C1]
Mitsubishi UFJ Financial Group (8306.T) lost 0.5 percent to 419 yen and Sumitomo Mitsui Financial Group (8316.T) shed 0.7 percent to 2,658 yen. Mizuho lost 1.3 percent to 153 yen.
Mizuho had registered with regulators last month to raise up to 800 billion yen in a global offering of new shares to prepare for stricter capital requirements, but had not made an official decision to go ahead with the offering. [ID:nTOE64D069]
Trade picked up on the Tokyo exchange’s first section, with 1.9 billion shares changing hands, the highest volume in two weeks. Declining shares outnumbered advancing ones by nearly 4 to 1.