* Nikkei, Topix both fall 0.8 pct in morning session
* Mitsubishi Corp sags after cutting profit forecast
* Index heavyweight Fanuc falls after JPMorgan downgrade
* Sharp jumps on report of boost in IGZO display output
By Dominic Lau
TOKYO, Oct 22 (Reuters) – Japan’s Nikkei average retreated
on Monday from a three-week high following losses on Wall Street
after U.S. bellwethers General Electric and McDonald’s
Corp added to a disappointing earnings season.
A hefty operating profit guidance cut from trading company
Mitsubishi Corp, down 2.7 percent and the most-traded
stock on the main board by turnover, also prompted investors to
lock in gains from last week, when the Nikkei climbed
5.5 percent to log its best weekly rise in nearly a year.
But Sharp Corp surged 8.7 percent after media
reported the display maker was raising production capacity for
its high-definition power-saving IGZO screens it hopes to sell
to makers of ultrabook computers. It was the third-most traded
stock.
By the midday break, the Nikkei dropped 0.8 percent to
8,929.54, coming off its day’s low of 8,867.79 and holding above
its 25-day moving average at 8,882.59 but was set to end a
five-day winning streak.
“The Nikkei is likely to be boxed in a range of 8,500 to
9,000,” said Shun Maruyama, chief Japan equity strategist at BNP
Paribas.
Maruyama said last week’s gain could not be sustained
because the short-selling ratio was about 24 percent on a
five-day moving average, below the 28 to 30 percent when short
covering tends to emerge, while long-only investors remained
sidelined.
“The rebound from short-covering is limited,” he said.
Komatsu Ltd shed 3.3 percent and Hitachi
Construction Machinery Co Ltd lost 2.9 percent after
U.S. rival Caterpillar Inc said its worldwide dealers’
sales of heavy equipment in the three months through September
slowed to 6 percent from 13 percent for the June-through-August
period.
Investors also took their cues from a weaker earnings
estimates from chipmakers Advanced Micro Devices and
Marvell Technology and punished their Japanese peers.
Tokyo Electron Ltd, Shinko Electric Industries Co
Ltd, Ibiden Co Ltd, Advantest Corp
and Renesas Electronics Corp were down between 1.7 and
2.4 percent.
Apart from Mitsubishi Corp, metal-processing machine maker
Amada Co Ltd also lowered its operating profit
forecast. The stock sagged 4.1 percent.
Although it is still early in the earnings season, 86
percent of the seven Nikkei companies that have reported
quarterly results missed market expectations, according to
Thomson Reuters StarMine. That compared with 54 percent missing
analyst forecasts in the previous quarter.
“Everybody is expecting crap earnings out of Japan,” a
senior dealer at a foreign bank said, adding that volume was
relatively thin and he would not read too much into Monday’s
weakness as a sign of direction for the market this week.
However, Japan’s exports tumbled more than expected in the
year to September, while manufacturers’ mood hits its lowest
since early 2010 in a sign a row with China is further hurting
the export-reliant economy grappling with the global slowdown.
The broader Topix index lost 0.8 percent to 748.46
in relatively light trade, with volume at 44 percent of its full
daily average for the past 90 days.
Index heavyweight Fanuc Corp sagged 3.2 percent to
12,870 yen after JPMorgan downgraded the industrial robot maker
to ‘neutral’ from ‘overweight’ and slashed its price target by
23 percent to 11,500 yen.
The benchmark Nikkei is up 5.6 percent this year, lagging
behind a 14 percent rise in the U.S. S&P; 500 and a 12.1
percent rise in the pan-European STOXX Europe 600
index.
