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Nikkei dips as Japan focuses on weak US data

TOKYO - The Nikkei share average slipped on Friday as weak U.S. economic data raised concerns over the health of the world’s largest economy and its impact on the export-reliant Japanese economy.

Japanese market players were more concerned over the soft U.S. data than Thursday’s positive U.S. corporate earnings, which helped propel the S&P 500 index to a 2-1/2-month high.

“Toshiba was up 5 percent on the back of U.S. earnings but what else came out in the U.S. that has any real bearing on Japanese stocks?” a senior deal at a foreign brokerage said.

“The bigger problem that you have got at the moment is the weak U.S. data that’s coming out.”

The Nikkei eased 0.3 percent to 8,770.30, holding above i ts five-day moving average at 8,754.34. The benchmark is still up 0.5 percent this week after dropping 3.3 percent last week to log its biggest weekly fall since mid-May.

However, Toshiba Corp gained 1.4 percent after surging more than 5 percent earlier, boosted by forecast-beating earnings from U.S. SanDisk Corp as margins on its flash memory chips exceeded expectations despite falling prices.

U.S. data on Thursday showed factory activity in the mid-Atlantic region contracted in July for a third straight month, new claims for jobless aid surged last week and home resales slumped to their lowest level in eight months in June.

Foreign investors were net sellers of Japanese equities for the third straight week last week, offloading 133.8 billion yen ($1.70 billion), data from Japan’s Ministry of Finance showed.

Jun Yunoki, an equity analyst at Nomura, said the brokerage’s data showed retail investors bought Japanese stocks on dips last week, particularly in shippers and machinery companies.

“Since they have been buying a lot of shares on long margin for the past three to four months, it comes to a level that they will have to start unwinding,” Yunoki said, adding that retail investors were unlikely to be buying aggressively.

The broader Topix fell 0.8 percent to 741.32 after breaking a nine-day losing streak on Thursday. The index is still up 1.7 percent so far this year.

With the recent weakness, the Topix’s 12-month forward price-to-earnings ratio slipped to 11.2 from a two-month high of 11.5 hit last week, according to Thomson Reuters Datastream.

Trading volume on the Topix on Friday was light, at 35 percent of its full daily average for the past 90 days.

Japan’s earnings season gets into gear next week.

Takashi Hiroki, chief strategist at Monex Inc, said Japanese companies were likely to post positive earnings.

He cited Yaskawa Electric Corp as an example. The electric motor maker rose 8.4 percent on Thursday after its first quarter operating profit beat market expectations and it lifted its first half operating profit forecast by 50 percent to 4.5 billion yen. Yaskawa shares were down 1.1 percent on Friday.

Investors also cashed in gains in the insurance sector , which dropped 3.7 percent as the top sectoral loser after rising 3.8 percent in the previous three sessions.