Nikkei down more than 2% on oil woesAlaska oilfield shutdown has...

Nikkei down more than 2% on oil woes
Alaska oilfield shutdown has impact on Japanese market; biggest decline in nearly three weeks.
August 7 2006: 4:01 AM EDT


TOKYO (Reuters) -- The Nikkei average slid 2.2 percent Monday, posting its biggest one-day fall in almost three weeks as a spike in oil prices raised concerns about softer consumer spending in the United States, Japan's key export market.

Toyota Motor Corp., the world's No. 2 auto maker, wiped out earlier gains and closed 0.8 percent lower on profit-taking after its quarterly earnings Friday beat market expectations.


Last week's lackluster U.S. payrolls report stoked worries about softer U.S. individual spending, and such worries were further fueled by a 1.7 percent jump in crude oil prices on supply fears on Monday.

"The market is worried that a further rise in oil prices would give a hard blow to the U.S. economy," said Hiroaki Kuramochi, managing director at Bear Stearns (Japan) Ltd.

"Oil is a key now," he said.

The Nikkei was down 345.12 points at 15,154.06, its lowest close since July 27. It posted its biggest one-day percentage drop since July 18.

The broader TOPIX index was 2 percent lower at 1,540.12.

Trade was slow, with just 1.37 billion shares changing hands on the Tokyo exchange's first section compared with a daily average of 1.90 billion shares for the previous three months.

Declining shares outnumbered advancers by a ratio of more than 12 to one.

The Nikkei rose as high as 15,516.24 soon after the opening, above a resistance point of its 13-week moving average of 15,448.

But momentum withered in the dearth of activity and speculative selling hit index futures, market analysts said.

Moreover, short-term investors hurried to lock in profits from recent gainers on solid earnings as a rise in oil prices provided another uncertainty ahead of an eagerly-awaited decision on U.S. interest rates on Tuesday.

Shares in Toyota fell to ¥6,030.

The company on Friday posted a better-than-expected 27 percent rise in quarterly operating profit but it stuck to its forecast for another year of record earnings.

Rival Honda Motor Co. Ltd. lost 1.8 percent to ¥3,750. Sony Corp. fell 1.7 percent to ¥5,070.

HIGHER OIL PRICES

Oil touched $76 a barrel on Monday after producer BP shut down the biggest oilfield in the United States indefinitely, while anxiety about Middle East supply continued to run high.

"The Tokyo market is now more concerned about external issues than upbeat quarterly earnings at home," said Yusuke Sakai, manager of equities trading at Mizuho Securities.

"They are quick to leave after locking in profits," he said, adding that behind such investor attitude lay growing uncertainty over the Federal Reserve's rate decision and its impact on U.S. stocks.

Japanese quarterly earnings came in better than companies had expected. Three months earlier they had estimated single digit profit growth for the year to next March.

First-quarter recurring profit grew 12 percent year-on-year, according to a survey by Shinko Research Institute of 796 non-financial first-section companies which had announced quarterly results by Aug. 4.

But only a few raised full-year forecasts amid caution over the strength of external demand, higher costs and other risks.

Among other decliners, Nikkei heavyweights came under pressure on arbitrage transactions, with chip equipment maker Advantest Corp. falling 4.9 percent 10,370 yen.

Asahi Breweries Ltd., the maker of Super Dry beer, fell 2.8 percent to ¥1,650. Japan's No.2 beer maker revised down its full-year operating profit forecast by 9 percent on Friday because of slower-than-expected sales of its low-malt "happoshu" brew.