Nikkei abandons early gains, eyes turn to Wall St

Mon Jul 14, 2008 2:31am EDT
(Adding stocks, details) *Nikkei abandons gains on U.S. rescue plan, nervousness grows *Steelmakers firm after JFE says may raise prices *Automakers dip on lagging economy, trading houses solid By Elaine Lies

TOKYO, July 14 (Reuters) - Japan's Nikkei stock average abandoned early gains to slip 0.2 percent on Monday to its lowest close in three months as the impact of emergency U.S. moves to help troubled home financing providers faded and lenders such as Mitsubishi UFJ Financial Group (8306.T: Quote, Profile, Research, Stock Buzz) fell back.

But falls were limited by gains from steelmakers such as JFE Holdings , which said it may raise prices, while trading houses were solid on continuing high oil prices.

Another strong gainer was Nisshinbo Industries Inc , which climbed after a newspaper reported the firm developed a technology to use carbon instead of platinum as the electrode catalyst for fuel cells , a move to save costs.

Mitsubishi UFJ and other banks initially rose sharply after the U.S. Treasury and Federal Reserve unveiled sweeping measures to support Fannie Mae and Freddie Mac if needed, to bolster confidence in the troubled mortgage financing giants. , but investors locked in profits on banks later before stepping to the sidelines to wait for U.S. trade.

"This news was completely fresh when it broke during Asian time, and U.S. markets haven't had a chance to factor it in yet," said Masayoshi Okamoto, head of dealing at Jujiya Securities.

"The real question is how Wall Street will respond, and ahead of this nobody can really buy actively," he said.

Others said the rescue plan alone is hardly enough to completely erase long-term worries about the economy and inflation, particularly with oil prices remaining relatively high.

Oil had slipped a bit, with U.S. light crude for August delivery CLc1 down to $144.52 by 0606 GMT, but it still remained high enough to be a worry for the long-term economy.

"Without some sort of good factor for the economy in the long-term, the market focuses on things like this situation, and nobody's taking risks," said Tomomi Yamashita, a fund manager at Shinkin Asset Management.

The benchmark Nikkei .N225 finished at 13,010.16, having lost 29.53 points, its lowest since April 15. The broader Topix was down 0.4 percent at 1,280.72.

STEEL STRONG, AUTOS ANXIOUS

Steel climbed to support the market after JFE Holdings, the world's third-largest steelmaker, said it may raise steel prices to offset soaring raw materials costs

A spokesman for JFE Steel said confirmed a Nikkei business daily report on Sunday about the possible price hike.

He said the company does not have a specific plan as to when or how much of its soaring costs it will transfer to clients, but he said a possible price hike could come as early as for the October-December quarter.

JFE Holdings was the biggest contributor by percentage to the Nikkei 225, rising 5.6 percent to 5,470 yen. It was followed closely by Nippon Steel with a rise of 3.6 percent to 582 yen and Kobe Steel which gained 3.1 percent to 296 yen.

The iron and steel subindex was the biggest gainer among the subindices, rising 3.3 percent.

Automakers slipped, worried less about higher steel costs and oil than about the overall economic picture in the United States, said Shinkin Asset's Yamashita.

Honda Motor Co slid 1.9 percent to 3,530 yen and Toyota Motor Co was down 1.8 percent at 4,800 yen, among the top 10 drags on the Nikkei by volume weight.

Trading companies were holding firm, with Mitsubishi Corp (8058.T: Quote, Profile, Research, Stock Buzz) up 1.9 percent at 3,280 yen and Itochu Corp up 1 percent at 1,043 yen, while banks fell back.

Mitsubishi UFJ slipped 1.4 percent to 3,280 yen and Mizuho Financial Group was up 0.6 percent at 538,000 yen compared with a high of 552,000 yen in morning trade.

Nisshinbo Industries gained 5.4 percent to 1,299 yen.

Trade was moderage, with 1.93 billion shares changing hands, compared with last week's daily average of 2 billion.

Declining shares beat advancing ones by 938 to 653. (Reporting by Elaine Lies;)