Nikkei falls to near 3-week low on global growth worries

Last Updated: Mon, Oct 01, 2012 03:20 hrs

By Sophie Knight

TOKYO (Reuters) - Japan's Nikkei share average fell to its lowest level in nearly three weeks on Monday morning as profit warnings from shipping group Nippon Yusen KK <9101.T> and Daido Steel Co Ltd <5471.T> underscored concerns over slowing global growth.

Weak economic data also dented confidence, with manufacturing activity in China, Japan's biggest export market, still in contraction in September, according to the official purchasing managers index.

Business sentiment for big Japanese manufacturers worsened in the three months to September and will stay gloomy, the central bank's tankan survey showed.

The Nikkei shed 0.8 percent to 8,796.82 by the midday break on Monday, breaking below its 75-day moving average at 8,866.55.

"Sentiment in Japan was more pessimistic than expected and could yet worsen, China's PMI wasn't great, we've got the United States' ISM tonight; it's a perfect environment to sell," said Fumiyuki Nakanishi, manager of investment and research at SMBC Friend Securities.

"Investors have also guaranteed their mid-year dividends so they're not too concerned about share prices falling," he added, referring to the mass of Japanese firms that went ex-dividend last Wednesday, triggering a 2 percent fall for the benchmark.

Nippon Yusen, which has fallen 30.5 percent this year, blamed weak business conditions for the cut in its first-half earnings guidance. The stock fell 1.5 percent on Monday morning.

Daido Steel also cut its interim profit forecast, citing securities valuation losses and weak shipments of its specialty steel products. Its shares dropped 6.1 percent.

"Macro figures are not overly impressive," a trader at a foreign brokerage said. "We've got some auto sales expected to come through weak."

U.S. auto sales figures are due out early this week. The Nikkei newspaper also reported over the weekend that sales of new cars in Japan for September, due out later in the day, would fall year-on-year.

Toyota Motor Corp <7203.T> and Nissan Motor Co <7201.T> lost 1.6 and 2 percent respectively.

But a dealer said his clients were picking up cyclical stocks, which have a relatively higher correlation to the health of the economy, and China-related plays.

"My suspicion is that there is some foreign money sloshing around today. Foreigners are putting a little bit of risk on, and the domestics are not doing much right now," he said.

Chemicals maker Nippon Shokubai Co Ltd <4114.T> slumped 13.4 percent to hit a more than 17-month low and was the second most-traded stock by turnover on the main board, after Japanese media said two acrylic acid storage tanks and one toluene tank at the company's plant in western Japan exploded on Saturday afternoon.

Rivals Sanyo Chemical Industries Ltd <4471.T> and Sumitomo Seika Chemicals Co Ltd <4008.T>, which are likely to benefit from a drop in Nippon Shokubai's supply of acrylic acid, the main ingredient used in diapers, surged 6.2 percent and 2.9 percent, re sp ectively.

Elsewhere, Japan Tobacco Inc <2914.T> slipped 2.6 percent as a tobacco tax hike comes into effect in France, which could hurt cigarette sales.

The broader Topix index dropped 1 percent to 730.09 by the midday break, with volume at just 39.4 percent of its full-day average over the last 90 days.

(Additional reporting by Dominic Lau; Editing by Edwina Gibbs and Richard Pullin)

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