Nikkei edges lower after rally, Egypt concerns weigh

TOKYO (Reuters) - Japan's Nikkei average edged lower on Thursday after surging the day before, as worries over an escalation of violence in Egypt nudged investors towards safer assets.

 Tumbles in high-tech stocks Panasonic Corp and Ricoh Co after reporting October-December earnings also weighed on the market. But clothing store chain operator Fast Retailing jumped on sales gains for January.

 Supporters of President Hosni Mubarak opened fire on protesters on the streets of Cairo, wounding seven, fanning concerns about Egypt. But a report showing U.S. private-sector employers added more jobs than expected in January lent support to the market.

 U.S. non-farm payrolls data is due out on Friday and may help set the direction for the Nikkei.

 "Market players see the January options settlement level at 10,470 as an immediate resistance level and while they wait for Friday's data, they are focusing on individual stocks of firms with strong earnings or recent news," said Masayuki Otani, chief market analyst at Securities Japan Inc.

  The benchmark Nikkei ended down 0.3 percent, or 26.00 points, at 10,431.36. It had surged 1.8 percent a day earlier.

 The broader Topix shed 0.2 percent to 927.57.

 This week marks the peak of Japan's corporate results reporting season for the October-December quarter. Bellwethers such as Sony Corp and Japan's biggest bank by assets Mitsubishi UFJ Financial Group reported after the market closed.

 "Traders are also reluctant to make big bets with heavyweights from industry, finance and electronics reporting today," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley Securities.



 STEEL MERGER

 After the bell, the market received major M&A news when Nippon Steel Corp and Sumitomo Metal Industries said they would merge next year to create the world's second-largest steelmaker after ArcelorMittal, aiming to cut costs and accelerate expansion overseas.

 Sony posted a 5.9 percent fall in third-quarter profit as a price war hit its TV unit and a stronger yen weighed while Mitsubishi UFJ Financial Group said net profit more than doubled for October-December, helped by smaller credit costs.

In Thursday's trade, shares of Panasonic Corp fell 3.2 percent to 1,090 yen in heavy trade after it posted a worse-than-expected 5.6 percent fall in quarterly profit, as tough price competition and a stronger yen outweighed help from Japan's incentive scheme for eco-friendly appliances.

Ricoh Co tumbled 9.9 percent to 1,052 yen, its lowest closing level since March 2009, after reporting a quarterly operating profit of 16 billion yen ($195.8 million),  a

33 percent drop from the same period a year earlier.

 Goldman Sachs said it was a "negative surprise", adding that Ricoh would have difficulties achieving the 31 billion yen profit projected for January-March.

 Bucking the negative trend was Fast Retailing, which gained 3.8 percent to 12,710 yen after it said sales at its Japan stores rose for the first time in six months in January, boosted by strong demand for winter clothing. Foreign investors bought a net 54.2 billion yen ($663 million) of Japanese stocks last week, government data showed, marking the 13th consecutive week of buying.

 "The market has become immune to the stronger yen," said Yumi Nishimura, a senior market analyst at Daiwa Securities Capital Markets, though she added the market could be dented if the dollar trades below 81 yen.

 "Most exporters are probably not assuming that the dollar will trade below 81 yen and stay below that level."

 Volume was moderate, with 2.0 billion shares changing hands on the Tokyo stock exchange's first section, which is in line with last week's average daily volume of 1.92 billion shares.Declining issues outnumbered advancers 781 to 743.