TOKYO, July 20 (Reuters) – Japan’s Nikkei average fell 0.9 percent but was off earlier lows on Tuesday, with tech shares hit by worry over the pace of U.S. economic recovery, disappointing U.S. corporate results and a strong yen.
Traders returned from a three-day weekend and were playing catch-up with other Asian markets that fell on Monday due to a sharp drop in U.S. consumer sentiment.
Charts suggested a further dip may still lie ahead, with the Nikkei’s MACD, a measure of market momentum, nearing a bearish cross while its slow stochastic — a measure of how oversold the market is and whether it is in a short-term up or down trend — continued to fall.
On Monday, Wall Street rose on hopes for earnings from Texas Instruments (TXN.N) and fellow tech firm International Business Machines (IBM.N), but shares of both slumped in after-hours trade as Texas Instruments’ revenue failed to impress and IBM’s revenue missed expectations. [ID:nN19191611] [ID:nN19215910]
But the dollar edged up against the yen JPY= after falling to a seven-month low on Friday, helping the Nikkei pare losses as short-covering emerged after the benchmark sustained its worst one-day percentage fall in over a month on Friday. [FRX/]
“It’s a sign that the economic recovery is slowing down when companies report profits that are above market expectations but their sales figures remain sluggish,” said Kazuhiro Takahashi, general manager at Daiwa Securities Capital Markets.
“Still, the market had risen on expectations towards strong profits, and things about sales numbers could have been used as an excuse to sell for now. Companies are at least in a position to produce profits now and hopes for the earnings season are continuing.”
Eyes remain on moves in the currency markets and U.S. earnings results, market players said, with Goldman Sachs (GS.N), Apple Inc (AAPL.O) and Yahoo Inc (YHOO.O) set to report later on Tuesday.
The benchmark Nikkei .N225 shed 81.09 points to 9,327.27 after earlier falling as much as 1.7 percent, while the broader Topix lost 0.8 percent to 834.22.
Japanese markets were closed on Monday for a holiday and on Friday the Nikkei fell nearly 3 percent as investors took profits.
On Monday, the NAHB/Wells Fargo Housing Market index fell more than expected in July to its lowest level since April 2009 after a popular tax credit for homebuyers expired in April, underlining fears about the economic recovery ahead of housing data including housing starts on Tuesday.
“There’s a slight ebbing of risk avoidance but some of the U.S. results are cause for concern, especially some not very good forecasts for later in the year, and this is affecting the Nikkei,” said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley Securities.
“A substantial break below 9,200 would leave us with few real support levels until around 9,000, but we’d probably need a substantial drop in either overseas stock markets or a surge in the yen for this to happen.”
Market players said support for the Nikkei was likely to hold for now at 9,200, just under its July 1 close, which was a seven-month closing low.
While charts look bearish, the benchmark is also approaching oversold levels on some fronts. Its relative strength index (RSI) hit 40, its lowest in roughly two weeks, with anything from 30 and below considered oversold, and its slow stochastic was approaching oversold territory.
Tech shares were hit by disappointment over U.S. corporate results, but pared earlier losses. The dollar was up 0.3 percent against the yen at 86.98 yen.
Chip gear manufacturer Tokyo Electron (8035.T) lost 2.6 percent to 4,695 yen and electronic components maker TDK Corp (6762.T) shed 2 percent to 5,000 yen. Sony Corp (6758.T) fell 2.5 percent to 2,344 yen.
Other exporters also fared poorly. Investors fret about a stronger yen since it eats into exporters’ profits when they are repatriated.
Toyota Motor Co (7203.T) slid 2.2 percent to 3,065 yen and Honda Motor Co (7267.T) fell 2 percent to 2,600 yen.
Shares of Daiwa Securities Group (8601.T), Japan’s second-largest brokerage, declined 2.6 percent to 378 yen after the Nikkei business daily reported the company likely suffered a loss in April-June, as financial market turmoil stemming from the Greek debt crisis took a toll.
The loss was likely between several billion yen and 10 billion yen ($115 million), marking a second consecutive loss for the company, which trails Nomura Holdings Inc (8604.T) in Japan’s mature brokerage market, the Nikkei said.
But shares of Leopalace21 Corp (8848.T) rose 2.7 percent to 232 yen after Credit Suisse lifted its rating on the developer and operator of apartments and hotels to “neutral” following its tumble close to the broker’s target price of 230 yen.
Leopalace’s stock had lost more than half its value over the past three months. Credit Suisse attributed the recent slide to a deterioration in occupancy rates, dwindling orders and unrealised losses on apartments. (Editing by Joseph Radford)