Nikkei down after Moody’s US debt warning, support holds

TOKYO, (Reuters): The Nikkei stock average fell but did not decisively break a major support on Thursday after Moody’s said it may cut the United States’ triple-A credit rating, sending the dollar near four-month lows and pressuringexporters.    

The Nikkei regained some ground in late afternoon when a sudden spike in dollar against the yen, attributed by currency traders to buying by a U.S. bank, encouraged buying among Nikkei futures players.    

 Mounting concerns about U.S. debt coming on top of euro zone woes are likely to prompt foreign players to trim long positions in Nikkei futures ahead of a long weekend in Japan and will also likely mean that Tokyo stocks will continue to struggle going into the earnings season, analysts said.    

 Those long positions were built in a rally since mid-June, with the Nikkei last week hitting its highest since the March 11 earthquake above 10,200 before a dismal U.S jobs report hurt sentiment.     

 “Moody’s move still hasn’t been priced in by the markets, so we’re seeing the Nikkei tracking losses sustained by S&P futures after the Wall Street close,” said Nagayuki Yamagishi, an investment analyst at Mitsubishi UFJ Morgan Stanley Securities.    

 “Debt ceiling problems are likely to be solved right before the deadline, so financial markets, still jittery about euro zone debt woes are facing an uncertain couple of weeks,” he said.    

 The benchmark Nikkei lost 0.3 percent to 9,936.12, after falling at one stage to as low as 9,884.00, beneath support at its 200-day moving average at 9,900. The broader

Topix shed 0.4 percent to 856.88.    

 After Moody’s move, the greenback dived towards 78.50 yen , at one point hitting a four-month low at 78.45, putting exporters under pressure but in late afternoon trade, it briefly jumped nearly 1 yen, hitting a session high of 79.61.    

“Then, 4,376 futures contracts jumped to 10,000 from 9,950, which sent the Nikkei to 9,988,” said an analyst. “Commodity trading advisors must have been big players.”     Although market did not see the jump seen as intervention by Japanese authorities, a senior Japanese finance ministry official said the government could intervene without warning, escalating a verbal campaign to cool the rising yen.



    

 Sony Corp lost 1.0 percent to 2,127 yen, while electronics parts maker Kyocera Corp dropped 0.7 percent to 8,220 yen.    

 Moody’s cited rising prospects that the $14.3 trillion U.S. debt ceiling may not be raised by an Aug. 2nd deadline. Failure to increase the country’s borrowing limit by then could result in a U.S. default that would roil financial markets.      

 Shippers dropped sharply after the Baltic Dry Index , which tracks rates to ship dry commodities, fell for a fourth session.     

 Nippon Yusen was down 1.7 percent at 295 yen and its biggest rival, Mitsui O.S.K. Lines lost 1.6 percent to 420 yen.    

 But shares of Toyota Auto Body soared 9.3 percent to 1,481 yen and Kanto Auto Works jumped 4.0 percent to 826 yen on Thursday after Toyota Motor Corp announced a

$1.3 billion overhaul of its manufacturing in northeastern Japan, including the purchase of the two units.     

 Stainless steel maker Nippon Metal Industry jumped 8.6 percent to 101 yen and Nisshin Steel rose 2.0 percent to 157 yen after industry journal Japan Metal Bulletin reported that the two companies are in the final talks to merge their operations and are close to announcing the deal.