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Nikkei drops 0.81 pct on U.S. debt standoff, firm yen

07-25-2011 19:19 BJT

TOKYO, July 25 (Xinhua) -- Tokyo stocks fell Monday, with the key Nikkei stock index losing 0.81 percent as a lack of progress in negotiations between U.S. lawmakers regarding the nation's debt ceiling, sent circumspect investors to the sidelines and a firm yen pressured Japan's key export sector.

Economists here said that while it remains almost inconceivable that the world's largest economy will fail to avert a debt default on Aug. 2, concerns were mounting as a deal to raise the country's 14.29 trillion dollar debt ceiling has yet to be made and the legislation, once agreed upon, needs time to pass through Congress.

Local traders said that U.S. Treasury Secretary Timothy Geithner's comments on Sunday saying that whilst negotiations need to speed up, he felt it was unimaginable to think the U.S. would fail to meet its debt obligations, went someway towards easing a jittery market, but investors still hit the sidelines to wait for a concrete decision, they said.

"Without an agreement on a deal, investors are going to start to worry about the outlook for the U.S. economy," said Naoteru Teraoka, general manager at Chuo Mitsui Asset Management Co. "If it takes a long time to settle the debt issue, it's going to weigh on stocks," he said.

The 225-issue Nikkei Stock Average fell 82.10 points from Friday to 10,050.01, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange lost 6.90 points, or 0. 79 percent, to finish the day at 861.91.

Stocks also came under pressure on the first trading day of the week, following ratings agency Moody's Investors Service Inc. downgrading Greece's credit rating by three notches.

Moody's said that Greece's latest bailout deal will adversely affect its creditors and added that it has "downgraded Greece's local and foreign currency bond ratings to Ca from Caa1 and has assigned a developing outlook to the ratings."

"The combination of the announced EU support program and debt exchange proposals by major financial institutions implies that private creditors will incur substantial economic losses on their holdings of government debt," Moody's said in a statement.

Greece's credit rating now remains one notch above default, following the latest downgrade, and the move sent the yen higher against the euro denting investor sentiment towards Japanese exporter issues.

With the yen hitting a four-month high of 78.12 versus its U.S. counterpart and 112.35 against the euro, large-cap exporters like Toyota lost ground.

The world's largest automaker dropped 1.4 percent to 3,290 yen, while smaller rival Honda lost 1.6 percent to 3,185 yen.

Electronic component maker Kyocera Corp. retreated 1.1 percent to 8,280 yen and consumer electronics giant Sony declined 2.2 percent to close at 2,054 yen.

Financial issues weighed heavily on the market in light of recent dollar-yen moves deemed by Japan's finance ministry to be one-sided, and ahead of a possible currency intervention on Japan' s part, banks took a pummeling on Monday.

Top-lender Mitsubishi UFJ Financial Group Inc., also Japan's largest bank by assets, fell 2 percent to 399 yen, while Japan's No. 2 bank Sumitomo Mitsui Financial Group Inc. relinquished 1.3 percent to finish at 2,497 yen.

Brokers said that sentiment would likely turn positive this week as Japan Inc. is set to release a slew of corporate earnings and economic indicators following the March 11 disasters suggest that firms have recovered more quickly than was initially expected.

Trading volume on Monday dropped to 1.41 billion shares on the Tokyo Exchange's First Section, down from Friday's volume of 1.77 billion shares, with declining issues outnumbering advancing ones by 1,037 to 467.


Editor:Zhang Dan |Source: Xinhua

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