Japan's Nikkei stock average fell 0.5 percent on Monday as Hitachi Ltd plunged after it warned of a record $7.8 billion loss on weak sales, a firmer yen and restructuring costs amid growing global economic gloom. Panasonic Corp also slid after a source with knowledge of the matter said it was set to book an annual $3.9 billion net loss, making it the latest firm likely to tumble into the red.
Others that forecasted gloomy earnings numbers on Friday include Mizuho Financial Group, Honda Motor Co, Fujitsu Ltd and NEC. Media have reported that Sharp Corp will also likely fall to a net loss for the year to March. The dismal outlook for many such firms was underlined by data showing the US economy shrank 3.8 percent in the fourth quarter, its fastest pace in 27 years, though analysts had predicted an even steeper fall.
"There's no question that the global economy has worsened a notch more, and concerns about this will be in a tug-of-war with expectations for economic stimulus policies," said Hiroichi Nishi, general manager at the equity division of Nikko Cordial Securities.
US President Barack Obama, under pressure to move swiftly to get his nearly $900 billion economic recovery plan through Congress by mid-February called Congressional leaders to a meeting on Monday to drive home his message of urgency. The growing economic gloom helped send the yen higher, but by midday the dollar had erased some of its losses, trading at around 89.83 yen. A strong yen eats into Japanese exporter profits when they are repatriated, making investors fret if the currency rises.
"Given how bad economic fundamentals have gotten, the market is really hoping for stimulus plans, especially now that the US plan has passed the House of Representatives," said Yutaka Miura, senior technical analyst at Shinko Securities.
He added that despite the dismal economic landscape the Nikkei was unlikely to fall sharply, nothing that the Dow Jones Industrial average managed to close above the 8,000 level recently, and the dollar has clung around 90 yen. The benchmark Nikkei shed 38.30 points to 7,955.75 after earlier falling more than 2 percent to 7,795.27, extending Friday's loss of 3.1 percent that capped a monthly loss for January of 9.8 percent. The broader Topix lost 1.1 percent to 785.40.
EARNINGS SHADOW: Though Miura said he thought the recent run of poor earnings is exerting an increasingly minimal impact on the overall market, others were less sanguine. "We've just had one bad set of results after another, and while bad results had been factored in, the actual numbers were worse than expected," said Masayoshi Okamoto, head of trading at Jujiya Securities.
Hitachi tumbled 14.3 percent to 252 yen after the company warned of a record annual loss - a loss that would be the worst ever by a Japanese manufacturer. At one point its shares were down more than 18 percent.
Panasonic shares fell 1.3 percent to 1,085 yen after a source, who spoke on condition of anonymity because the information is not yet public, confirmed a report by the Yomiuri newspaper that Panasonic was facing a loss of 350 billion yen ($3.89 billion) for 2008/09.
The loss would be Panasonic's biggest since the firm posted a loss of about 430 billion, yen for 2001-02. Banks slipped after their US counterparts fell on worries about whether a 'bad bank' to soak up bad assets will be set up or not. Mitsubishi UFJ Financial Group fell 4.1 percent to 489 yen and Mizuho Financial Group lost 5.3 percent to 215 yen. The banking subindex lost 2.7 percent, the third-biggest loser among the subindices.
But Daiichi Sankyo bucked the trend, rising 2.9 percent to 2,100 yen after US regulatory staff on Friday recommended approval of Eli Lilly and Co and Daiichi Sankyo's anti-clotting drug prasugrel. Trade was active on the Tokyo exchange's first section, with 931 million shares changing hands, compared with last week's morning average of 861 million. Declining stocks outpaced advancing ones, 879 to 666.
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