Reuters: Financial Services and Real Estate: Nikkei sags as global worries weigh; investors unravel positions

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Nikkei sags as global worries weigh; investors unravel positions Jun 8th 2012, 03:28 Thu Jun 7, 2012 11:28pm EDT * Nikkei a whisker away from worst losing streak in 37 years * Investors worry China interest cut signals poor weekend data * Renesas surges 13.2 pct on short squeeze By Sophie Knight TOKYO, June 8 (Reuters) - Japan's Nikkei share average fell on Friday morning, edging close to its worst weekly run in 37 years as lurking fears on the eurozone, disappointment with the U.S. Federal and caution on China's economy weighed on sentiment. The drop, which follows three days of gains was also triggered as investors booked profits after a major settlement of June options earlier in the session. The Nikkei slipped 2 percent to 8,470.35 at the midday break. A drop of another 30 points would leave it down for the tenth week straight, its worst weekly losing streak since 1975. China's central bank unexpectedly cut benchmark interest rates for the first time in three years to tackle the country's slowing growth on Thursday, but investors were concerned that the move could be a hedge for poor data at the weekend. "The rate cut should have been a positive but it comes at suspicious timing," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley. "It makes people think that really bad news is going to be unleashed this weekend." The U.S. Federal Reserve's refusal to commit to immediate easing also disappointed investors hoping for a stimulus to jumpstart the sluggish U.S. jobs market and to lessen the impact of a deepening euro zone debt crisis. Investors also sold after June options and futures contracts, known as a "special quotation" or "options SQ" were settled at 8,613.40, a level that a lot of investors had bet on for the Nikkei to reach before the contracts settled. "Investors are now unravelling their positions as they managed to limit their losses in the options SQ by desperately pushing prices up this week," said Mitsubishi UFJ Morgan Stanley's Fujito. "The worst hit are the biggest firms on the Nikkei because they were bought as part of a package." Widely held Fast Retailing shed 3.8 percent as the most traded stock by turnover, while Fanuc Ltd lost 2.6 percent, weighing on the benchmark index. Renesas Electronics Corp swam against the tide, shooting up 13.2 percent as investors scrambled to cover their short bets. The troubled chipmaker has abandoned a plan to ask its major shareholders for a capital injection, meaning the stock will not react to further negative news, according to several fund managers. Other chipmakers slipped after being in favour yesterday on overnight gains in a U.S. chip index. Toshiba Corp fell 2.7 percent and Tokyo Electron Ltd shed 3.8 percent, but Advantest was boosted to a 1.6 percent gain on a Deutsche Securities Rating upgrade to "buy" from "sell". Market participants said the week's gains before Friday were driven by short-covering and bargain buying, with a few investors putting in long bets, and hence did not reflect greatly improved risk sentiment. "The Greek election is still to come, nothing concrete has been decided in Europe and Draghi didn't commit to anything," said Fujio Ando, senior managing director at Chibagin Asset Management, referring to the president of the European Central Bank who put the onus on European governments to solve the euro zone debt crisis on Wednesday. The broader Topix fell 1.7 percent to 718.39, holding above the psychologically important 700-level, which it breached on Monday to hit a 28-year low. Market watchers say the Bank of Japan usually steps in to support the market by purchasing exchange-traded funds when the Topix falls more than 1 percent in the morning session. Link this Share this Digg this Email Reprints

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