* Steelmakers fall after weakness in U.S. peers
* Power companies rise, Goldman Sachs upbeat on sector
* Macquarie cuts Topix 12-month target by 16 pct to 770
* Japan companies’ earnings momentum worsens in June
By Dominic Lau
TOKYO, Aug 24 (Reuters) – Japan’s Nikkei average shed 1.1
percent on Friday, retreating from Thursday’s three-month
closing high, as conflicting views from two senior U.S. Federal
Reserve officials on the need for quick stimulus measures
prompted second thoughts among investors globally.
Speaking separately over the past day, Chicago Fed President
Charles Evans, a policy dove, supported taking more action,
including buying bonds, to bolster the U.S. economy, while St
Louis Fed President James Bullard, regarded as a policy
centrist, played down chances for an imminent easing. Neither
official has a vote on the Fed’s policy-making
committee.
By the midday break, the Nikkei dropped 100.94
points to 9,077.18, breaking below its five-day moving average
at 9,143.02 a n d its 26-week moving average at 9,146.43.
A trader at a foreign bank said domestic investors were
pocketing profit after recent run, but some overseas players
were buying on dips.
“What we are seeing on the client side is that they are
actually net long. Many (overseas) guys are trying to pick up
some machinery names on weakness,” the trader said.
Steelmakers shed 2.1 percent, making theirs one
of the worst performing sectors, and tracked overnight weakness
in U.S. counterparts after an analyst downgraded steel
producers, saying that prices for the metal will decline.
Nippon Steel Corp, JFE Holdings Inc and
Nisshin Steel Co were down between 2.3 and 3.4 percent.
Other economy-sensitive sectors also came under pressure,
with Toyota Motor Corp, Nissan Motor Co, Honda
Motor Co and industrial robot maker Fanuc Corp
shedding between 0.9 and 1.5 percent.
The broader Topix index lost 0.9 percent to 757.41.
Trading volume on the main index after the morning session was
light, at 34 percent of its full daily average for the past 90
days.
Gains in power companies, up 1.6 percent as the
only sector in positive territory after an upbeat note from
Goldman Sachs, offered the market some support.
Goldman Sachs said raising tariffs by the power companies
could be a “big positive” and they might be able to reduce or
avoid losses even without nuclear restarts.
The brokerage upgraded its ratings on Kansai Electric Power
Co Inc and Tohoku Electric Power Co Inc to
‘buy’ from ‘neutral’. Kansai Electric Power and Tohoku Electric
power jumped 6.5 and 6 percent respectively.
“Yesterday the Chinese figure was very bad, so U.S. equities
went down. But the recent rally was too good for Japan,” said
Hisao Matsuura, equity strategist at Nomura Securities, adding
that it was only natural for the market to consolidate.
Growing expectations that the European Central Bank will
soon launch a bond-buying programme to bring down borrowing
costs for highly-indebted nations have helped the Nikkei rebound
9 percent since it hit a seven-week low on July 25, leaving it
up 7.2 percent so far this year.
“September is a bit worrisome because everyone is worried
about what kind of message will come from the ECB. But after
that no major event is expected,” Matsuura said. “Investors will
go back to the market and look for value stocks. This kind of
action will push up the market.”
WEAKER EARNINGS OUTLOOK
The outlook for Japanese companies’ earnings remains weak.
According to Thomson Reuters Datastream, Japanese companies’
one-month earnings momentum — analysts’ earnings upgrades minus
downgrades as a total of estimates — deteriorated to -9.1
percent from a fall of 4.8 percent last month.
Macquarie Securities lowered its 12-month Topix target by
16.3 percent to 770, a 0.7 percent upside from Thursday’s close,
as it expected weaker earnings growth from Japanese companies.
“The first negative development relates to Japanese
industrial production, which has been weak and underperforming
expectations so far in 2012,” it said in a report.
“The second negative development relates to forward looking
indicators, such as the OECD leading indicator. Looking into
2013, spreading excess capacity across the world will lead to
weakness in capital expenditure, which is a particular worry for
Japan.”
