April 5, 2012 / 7:29 AM / 5 years ago

Nikkei marks four-week low on Europe fears, eyes on BOJ

* Nikkei logs third day of losses
    * Automakers, financials suffer
    * Market looks to BOJ meeting for catalyst
    * Kansai Electric outperforms on hopes of reactor restart

    By Mari Saito	
    TOKYO, April 5 (Reuters) - Japan's Nikkei share average fell
for a third straight day to four-week low on Thursday, hurt by
renewed concerns about Europe's funding difficulties after a
weak Spanish debt auction and by fading hopes for additional
stimulus from the U.S. Federal Reserve.	
    But the Nikkei is still up more than 15 percent this year,
supported by liquidity boosting programmes from central banks
and a run of strong U.S. economic data, and strategists said
that while the market was now decidedly more cautious, they do
not expect a bear market relapse.	
    "We remain positive mid-term, and don't anticipate a
full-scale flare-up of the Greek crisis, another natural
disaster in Japan or a hard landing in China," Naomi Fink, Japan
equity strategist at Jefferies, said in a report.	
    Fink and others said the market direction in Tokyo would, to
a large extent, be determined by signals from the Bank of Japan.	
    It meets next week and is expected to maintain its easy
monetary stance after setting an inflation goal and announcing
hefty increases in bond buying in February which spurred an
equities rally and weakened the yen by more than 5 percent.	
    "An outsider's perspective on Japan for the last 15 years is
that it has looked like a value trap...What we're trying to
think hard about is the latest changes in the BOJ and whether
this is really going to be a game changer," said Andrew Pease,
chief investment strategist of Asia Pacific at Russell
Investments.	
    The benchmark Nikkei ended down 0.5 percent or 52.38
points at 9,767.61, after sliding more than 2 percent on
Wednesday.	
    The broader Topix index ended down 0.3 percent at 832.57,
paring earlier losses after traders said the Bank of Japan
likely supported the market by buying exchange-traded funds in
afternoon trade.	
    Spanish borrowing costs jumped at a bond auction on
Wednesday, raising fears that the euro zone debt crisis may
flare up again and suggesting that the effects of a liquidity
injection that has bolstered risk assets so far this year may be
waning.	
    Automakers and financials were among the most actively
traded stocks with Toyota Motor Corp down 0.7 percent,
Honda Motor Co losing 1.1 percent, and insurer Tokio
Marine Holdings Inc off 1.3 percent.	
   Trading volume ticked up, with 2.2 billion shares changing
hands on the main board, up from 2.1 billion shares on
Wednesday.	
    	
    Lower valuations for Tokyo equities have also supported the
market so far but some said that was no longer the case.	
    "Now there's not a lot of valuation headroom globally and
you have to be a little cautious with reality coming into the
frame on Europe," said Pease.	
    In terms of valuations, the Topix carried a 12-month
forward price-to-earnings ratio of 13.73, compared to 12.97 for
U.S. S&P 500 and 10.77 for STOXX Europe 600.	
    A trader said investors can buy short-dated Nikkei call
spreads expiring in April or May as a cheap way to capture any
upside ahead of the central bank meeting. 	
    Kansai Electric Power Co Inc outperformed the
broader market, up 3.2 percent after a report that Japan's trade
minister is set to seek local approval for the restart of the
utility's Ohi nuclear plant as early as Sunday.	
   Falling in heavy volume, Point Inc shed 2.9 percent
to 2,924 yen after the casual clothing shop firm reported a 19.4
percent drop in annual operating profit.  	
   The disappointing results prompted Nomura to cut its earnings
forecast for the current fiscal year and its price target to
3,300 yen from 3,900 yen.

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