Nikkei drops for 3rd straight day; SoftBank, lenders weigh

 

Japan's Nikkei average fell for a third day in a row on Tuesday, shedding 0.4% with the mood soured by concerns over stumbling global growth, but renewed weakness in the yen enabled the market to pare some of its early steep losses.

 

The Nikkei ended 54.22 points lower at 13,221.44. The benchmark dropped as much as 2% to a one-week low of 13,004.46 in the morning session but moved back into positive territory several times in the afternoon.

 

Tuesday loss marked its longest losing streak in nearly three months as the benchmark has rallied more than 26 % this year on the back of aggressive government and central bank policies to revive the world's third-largest economy.

 

"It's hard to tell which comes first but the Nikkei rebounds as the yen softens in the forex market," said Kenichi Hirano, a strategist at Tachibana Securities. "Some exporters and (the index heavyweight) Fast Retailing were leading the gains."

 

The yen traded as high as 95.67 to the dollar in early Asian session on Tuesday. It then retreated and was last quoted at 97.59 yen.

 

Fuji Heavy Industries Ltd , the maker of Subaru car, and Olympus Corp added 2.3% and 2.2%, respectively, while Fast Retailing Co Ltd rose 1.4%, contributing 18 positive points to the Nikkei.

 

However, SoftBank Corp  sank 6.8% after U.S. Dish Network Corp offered to buy wireless service provider Sprint Nextel Corp for $25.5 billion, which could trump the Japanese firm's bid for a 70% stake for $20.1 billion.

 

SoftBank was the top-weighted loser, contributing 38 negative points to the index. It also was the second-most traded stock on the main board by turnover. It marked its biggest one-day %age drop since October 12, a day after Sprint said it was in talks on potential sales to SoftBank.

 

The broader Topix dropped 1.3% to 1,119.20 after earlier trading as low as 1,106.18. Some traders said they suspected the Bank of Japan bought exchange-traded funds to support the market in the afternoon, as it customarily carries out such operations when the Topix drops more than 1% in the morning.

 

"Judging from today's price movement, where prices were holding up pretty well, I think it is highly likely that the Bank of Japan bought ETFs to support the market," said Kyoya Okazawa, Tokyo-based head of global equities at BNP Paribas.

 

"That way, the BOJ sends a message to the public that the central bank is watching, and stands ready to support the market."

 

WEAK CHINA, U.S. GROWTH

 

In recent sessions, concerns about soft data from China and the United States have heightened worries about the global growth outlook. Investors in Japan have used this period to book gains after the market surged to near five-year highs last week.

 

Chinese growth stumbled unexpectedly in the first three months of 2013, while data showed the pace of growth in New York state manufacturing slowed more than expected in April and U.S. homebuilder sentiment waned for a third month in a row.

 

Sentiment was also dimmed by two simultaneous explosions at the Boston Marathon on Monday, killing three people and injuring more than 100 others.

 

U.S. stocks extended their losses as the news weighed on already jittery markets. Overnight, gold led a broad rout for commodities on growth worries, dropping 9% to mark its biggest loss since 1983. Gold and other commodities rebounded on Tuesday, but traders remained wary about the outlook for these markets.

 

Japanese stocks that have rallied hard on the back of the BOJ's sweeping stimulus took a battering on Tuesday, with the banking sector, which is seen benefiting from Japan's reflationary drive, down 3.1%.

 

Lenders Mitsubishi UFJ Financial Groupfell 3.6 %, and Sumitomo Mitsui Financial Group  eased 3.4%.

 

The BOJ shocked the financial markets on April 4, with bolder steps that even eclipsed the U.S. Federal Reserve's massive quantitative easing program, promising to inject $1.4 trillion into the economy in less than two years.

 

In terms of valuations, Japanese equities carry a 12-month forward price-to-earnings ratio of 13.3, slightly below the S&P 500's 13.5, data from Thomson Reuters Datastream showed.