Nikkei edges lower on Sony, lingering economic uncertainty

TOKYO (Reuters): The Nikkei stock average fell on Friday for its third straight week of losses, pulled lower by a drop in Sony Corp shares after the electronic giant’s earnings outlook undershot analyst forecasts.

While positive news this week, such as the launch of new investment trusts, helped to lift the Nikkei from a two-month closing low hit earlier this week, the market lacked strong drivers to push it out of its post-quake range.

“I expect the market to be stuck in its current foggy condition for more than a month. Global shares could remain unstable for now, while there’s no strong domestic factors to spur buying,” said an official at a Japanese brokerage.

The benchmark Nikkei .N225 fell 0.4 percent to 9,521.94 on Friday, meaning it shed 0.9 percent over the week. On the weekly Ichimoku chart, the bottom of the cloud comes in at above 9,600, posing immediate resistance.

The broader Topix shed 0.3 percent to 824.90, falling 0.3 percent on the week.

Sony, which is struggling with the aftermath of a massive earthquake and a series of network security breaches, dropped 3.2 percent to 2,167 yen.

The consumer electronics maker on Thursday predicted an 80 billion yen ($975 million) net profit for the current financial year, turning around from a massive loss in the year just ended but missing analysts’ consensus of 105 billion yen.

“Its forecasting a profit gain is positive, but the figure was worse than what the market had expected,” said Naoki Fujiwara, a fund manager at Shinkin Asset Management.

But Fujiwara said bargain hunting is likely to support the market between 9,500 and 9,600 on the Nikkei as Tokyo shares are relatively undervalued.

Shares on the Tokyo Stock Exchange’s main board are trading at book value, while stocks in the S&P 500 are trading at 2.2 times their book value and Hong Kong shares are at 1.8 times, according to Thomson Reuters Starmine.

“When you look at global comparisons, 9,500 in the Nikkei is not that expensive,” said Tetsuro Ii, the president of Commons Asset Management.

Still, uncertainty over exactly how quickly companies can recover from damage from the March 11 quake and tsunami is likely to keep buying in check.

“Investors who haven’t bought yet will probably wait until they see earnings in April-June, which will show not just sales but also extra costs companies are paying after the quake,” said the official from the Japanese brokerage.

Carmakers were lower, with Toyota Motor falling 0.6 percent to 3,335 yen and Honda Motor shedding 0.8 percent to 3,070 yen.

Toyota and Honda saw their global production slump to around half of year-ago levels in April after the quake wreaked havoc on their supply chains.

Automakers are trying to speed up efforts to resume full output, and some key suppliers have said that recovery in production is moving forward a few weeks faster than planned.

Banking shares gained on a report that capital requirements for European banks may be relaxed, with the banking subindex rising 0.2 percent.

The Financial Times reported that banks in the European Union could avoid part of the tighter Basel III capital requirements under draft legislation implementing the new globally agreed standards across the 27-member bloc.

Trading volume petered out ahead of long weekend both in the U.S. and the U.K. hitting the second-lowest level this year with only 1.51 billion shares changing hands on the main board.

That was slightly above the lowest level in 2011 hit on April 25 when volume stood at 1.46 billion shares.

Decliners outpaced advancing shares by 956 to 544.