tokyo 10 19, 2012, 08:50 IST
Japan's Nikkei share average dipped on Friday as investors took disappointing earnings from Google Inc and Microsoft Corp as an opportunity to take profits after this week's steep rally, but expectations of easing limited losses.
The benchmark was still on track for its biggest weekly gain in a year as robust risk appetite kept the yen soft, helping exporters, while China-related stocks extended gains after data on Thursday hinted the country's slowdown is bottoming out.
"The deceleration of China's economy seems to have dropped its pace, which is a supporting factor, but basically people are adjusting their positions before the BOJ meeting," said Hideyuki Ishiguro, senior strategist at Okasan Securities, referring to the Bank of Japan.
At its next policy meeting on October 30, the central bank is expected to admit it will miss its 1 percent inflation target for several years to come, according to sources, as it comes under fresh political pressure to contain the effects of a global slowdown on Japan's export-reliant economy.
More From This Section
"The focus is now not on whether they will ease or not, but rather what kind of easing they will do. They understand that if they don't put out something impressive enough to convince the markets it will hurt the economy," Ishiguro said.
The Nikkei dropped 0.2 percent to 8,970.56 after topping 9,000 earlier in the morning for the first time in three weeks, and was up 5.1 percent up on the week, on track for the biggest gain since early December 2011.
Yahoo Japan <4689.T> slipped 3.1 percent after Google's third-quarter earnings and revenue came in well under forecasts as its core advertising business slowed, sending its shares down 8 percent, while Microsoft's quarterly profit fell more than expected, hurt by the industry-wide slump in PC sales.
"There was bad news from Google and it's the last day of a week in which the Nikkei has added 400 points, so I think we could see some profit-taking on cyclicals today," said Masayuki Doshida, senior market analyst at Rakuten Securities.
EARNING FAVOUR
Less pessimism about dwindling demand in China helped industrial robotics maker Fanuc Ltd <6954.T>, which has large exposure to the country, gain 2.7 percent, lending 13.6 positive points to the benchmark.
Similarly, machinery construction maker Komatsu Ltd <6301.T>, often used as a barometer for sentiment towards China, was just behind Fanuc as the third-most traded stock on the main board, moving up 2 percent.
However, earnings in the U.S. have overall been stronger than expected, leading investors to judge last week's aggressive sell-off as overdone and to buy back some battered stocks.
NEC Corp bounced back 7.3 percent after falling 4.6 percent on Thursday, following a report in the Nikkei daily that its operating profit for the April-September half was likely to have expanded sixfold. During the midday break, the company raised its guidance for the period to 47 billion yen from a previous forecast of 1 billion yen, after restructuring boosted profit margins.
Conversely, Hino Motors Ltd lost 1.7 percent as investors sold the stock following a Nikkei report that operating profit would reach a record 30 billion yen for the first half, taking profits after the share price rallied 13.3 percent this month on the expectation of strong profits.
Elsewhere, the utility subindex was the best-performing sector after the Nikkei business daily said Hokkaido Electric Power Co Inc <9509.T> will increase its bank loans to 100 billion yen from 40 billion yen as it struggles to cover the cost of fossil fuels with its nuclear power reactors offline.
The utility's share price climbed 3.8 percent, pulling the sector up 1 percent.
The broader Topix index <.TOPX> added 0.1 percent to 752.68 in strong trade, with volume at 57.8 percent of its full-day 90-day average.
(Editing by Daniel Magnowski)