Tokyo shares likely to tumble further

Japanese shares are likely to tumble further in the coming week on lingering concerns for the gloomy outlook of the US economy, analysts said Friday. "Buying sentiment is likely to stay low next week as trading is expected to remain cautious amid continued concerns about the prospect for the US economy," said Masatoshi Sato, a senior strategist at Mizuho Investors Securities.
In the week to July 18, the headline Nikkei-225 index lost 235.99 points or 1.81 percent to end Friday at 12,803.70. The broader Topix index of all first section shares on the Tokyo Stock Exchange fell 33.48 points or 2.6 percent to 1,252.43.
Oil prices are likely to remain a key focus among investors, who generally expect the current price fall to continue in the coming week in a sign of economic slowdown in the United States, analysts said.
"I think oil prices will continue to drop from now," said Daisuke Uno, chief market strategist of Sumitomo Mitsui Banking Corp. "Market players first welcome lower oil prices because they are worried about inflation pressure." "But it will not last long," Uno added.
Sliding oil prices in the past few days prompted Tokyo investors to rush to buy US shares in the Friday morning trade, seeing the trend as a sign of receding inflation pressure. But the key Japanese index closed lower, with some analysts saying a quarterly net loss announced by Wall Street investment giant Merrill Lynch overshadowed the market.
Merrill was forced to write down over nine billion dollars in soured investments, largely linked to bets on US mortgage investments that have been hit by a horrific housing slump after years of sizzling growth. Mizuho's Sato said selling pressure emerged in the afternoon as players turned out to be cautious ahead of a three-day holiday.
"All in all, Japanese shares would be weighed down by selling pressure next week," he said. "The Nikkei is most likely to stay below the 13,000 yen level unless any positive surprise comes out."
Sumitomo's Uno said Japanese share prices will drop to the 12,300 level in the coming week, as investors will likely realise lower oil prices will be a sign of smaller demands in the US economy. "If you think of the stock market based on oil prices, Japanese share prices will inevitably fall," he said.