Japan's Nikkei stock average fell on Friday, slipping back below the 9,000 level as profit-taking emerged after six straight days of gains and ahead of a key US jobs report, while machinery stocks lost ground after weak capital spending data. After sliding almost 9 percent in August, the Nikkei has managed to stage a 4.9 percent climb in the last six sessions but for now, uncertainty about the strength of the global economy is capping the upside.
A decline in the employment component of the Institute for Supply Management's factory activity index on Thursday has heightened worries that US nonfarm payroll data due later on Friday will be worse than some had initially believed. "Global economic worries are the main focus and volume has been relatively low recently. At times like this, both buying and selling can be risky, so this is keeping stocks trapped in their recent ranges," said Yutaka Miura, a senior technical analyst at Mizuho Securities.
The jobs report is the only major employment indicator before the Fed's specially lengthened two-day policy meeting from September 20, at which many market participants expect the Fed to decide on additional easing steps. Unemployment is a key determinant in whether the Fed takes additional action to support the economy. The Nikkei fell 1.2 percent to 8,950.74 after closing above 9,000 on Thursday for the first time in two weeks. For the week, it rose 1.7 percent.
The broader Topix index dropped 1.1 percent to 769.78. Analysts said that for next week, US President Barack Obama's new jobs proposals, due on September 8 will likely set the tone for equities markets with some adding that battered Japanese exporters could refind favour if the proposals were well received.
Machinery makers tumbled after data showed domestic firms unexpectedly cut their capital spending by 7.8 percent in April-June from a year earlier, compared with an average economists' forecast for a 1.2 percent rise, hurt by a strong yen and slowing global demand. Machine tool maker THK Co tumbled 6.0 percent to 1,457 yen, peer Okuma Corp shed 5.9 percent to 554 yen and industrial robot maker Fanuc dropped 3.1 percent to 12,570 yen.
Automakers were weaker after data showed their US sales dropped in August. Toyota Motor fell 1.6 percent to 2,711 yen after its US sales fell 13 percent last month and Honda fell 2.0 percent to 2,507 yen after its sales tumbled 24 percent. Sony Corp dropped 4.3 percent to 1,625 yen. The Nikkei business daily reported Friday that the yen's strength against the euro is pushing down operating profits of electronics manufacturers, including Sony.
Department stores were weaker, with Isetan Mitsukoshi Holdings dropping 3.8 percent to 762 yen after J.P. Morgan started coverage of the stock at "underweight", citing poor profitability. Takashimaya Co shed 2.3 percent to 522 yen after its August sales fell 0.9 percent from a year earlier, the first drop since May. Volume was thin, with 1.7 billion shares changing hands on the Tokyo stock exchange's main board, lower than last week's average of 2.04 billion yen. Declining shares outnumbered advancing shares by 1,049 to 441.
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