October 12, 2016 / 2:17 AM / a year ago

Nikkei down after Wall St falls on weak earnings

* Nikkei expected to move between 16,500-17,500 for next few weeks - analyst

* Defensive stocks outperform

By Ayai Tomisawa

TOKYO, Oct 12 (Reuters) - Japanese stocks dropped on Wednesday morning, retreating from a five-week high after Wall Street was hit by weak corporate earnings overnight and as investors braced for Japan Inc.’s reporting season.

The benchmark Nikkei share average fell 0.8 percent to 16,895.42 in midmorning trade, after ending at a level not seen since early September on the previous day.

U.S. shares fell after Alcoa missed its quarterly estimates and cut its revenue forecast.

“Alcoa’s result soured sentiment towards U.S. earnings in the beginning of the earnings season,” said Isao Kubo, an equity strategist at Nissay Asset Management.

Later in the month, major Japanese companies will also begin releasing earnings for the first half through September.

“Japanese corporate earnings are expected to show weakness (due to a stronger yen), so for the next few weeks, the market will likely be volatile,” said Yoshihiro Okumura, general manager at Chibagin Asset Management, adding that the Nikkei is expected to move between 16,500-17,500 for the next few weeks.

On Wednesday, cyclical stocks fell in sympathy with investors’ risk-averse mood. Banks underperformed, with Mitsubishi UFJ Financial Group and Mizuho Financial Group each dropping 1.9 percent.

Exporters were broadly weak, with Toyota Motor Corp shedding 0.4 percent and Nissan Motor Co falling 0.5 percent.

Defensive stocks, including construction, real estate and railroad firms, outperformed. Contractor Kajima Corp rose 2.3 percent, realtor Mitsui Fudosan Co gained 0.4 percent and East Japan Railway Co added 0.2 percent.

Japan’s machinery data had little impact on the market, although core orders fell much less than expected in August

The broader Topix shed 0.3 percent to 1,351.96 and the JPX-Nikkei Index 400 declined 0.3 percent to 12,105.24.

Editing by Shri Navaratnam

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