Nikkei slides

Japan's Nikkei stock average fell more than two percent in moderate trade on Monday, with Toyota Motor Corp and other exporters battered as the dollar hit a 7-month low against the yen. But Japan Airlines (JAL) climbed nearly 8 percent following news that the struggling airline was in talks on investment by American Airlines and Delta Airlines.
Smelters slid after copper prices tumbled near two-week lows on Monday, with Shanghai futures touching their 5 percent downside limit on demand woes. The dollar fell to a seven-month low below 90.21 yen in early Asian trade, helped by talk of Japanese fund repatriation and the view that it is replacing the yen as the funding currency for carry trades. It later pared some of its losses to 0.2 percent lower at 90.57 yen.
Japanese exporters are likely to feel the pain of a stronger yen at levels below 95 to the dollar. That's roughly the average rate seen by large exporters in the Bank of Japan's last quarterly tankan survey for the current business year to March.
Honda Motor Co said in July that it was assuming a dollar/yen rate of 91 yen for the current financial year. Market players fret that the yen's rise against the dollar could hurt the outlook for corporate earnings, as a stronger yen cuts into the value of exporters' overseas profits when they are repatriated.
"The fact that the euro is still holding its ground will help support the market a bit, but the dollar certainly does not seem to be heading in a good direction," said Hiroaki Osakabe, a fund manager at Chibagin Asset Management. The benchmark Nikkei fell 2.3 percent or 242.27 points to 10,202.06 after earlier dropping as much as 2.6 percent. The broader Topix lost 1.7 percent to 934.05.
Support for the Nikkei is seen at 10,100, around where its 50-day moving average comes in, and then at 10,000 - the level of its 75-day moving average as well as being an important psychological support level. Should it break below this, the next support is at 9,800, where the 100-day moving average lies, although market players thought it was unlikely the Nikkei would fall that far.
"The dollar has fallen pretty sharply in the last month, and until it comes to a halt the Nikkei may stay under pressure as well," said Masayoshi Okamoto, head of dealing at Jujiya Securities. "At worst, though, its fall is likely to stop around 10,000. But the energy to recover will be limited." JAL FLIES JAL rose 7.9 percent to 176 yen, outperforming the air transport subindex, which rose 2.4 percent to become the biggest gainer among the subindexes.
JAL, Asia's largest airline by revenues, lost about $1 billion last quarter and has been seeking investors to prop up its finances for a state-supervised overhaul expected to include job cuts, a reduction in routes and asset sales.
"JAL shares will stay high today, as uncertainties about its financial conditions are eased by the report of investment," said Kazuhiro Takahashi, manager of equities at Daiwa Securities SMBC. "However, whether JAL can turn around its business is another story. Focus is on details of the possible deals and how JAL capitalises on them to reform its management."
Astellas Pharma Inc was also one of a scant handful of shares in positive territory after a key antibiotic drug, telavancin, had won marketing approval from US regulators. Astellas rose 0.6 percent to 3,670 yen. Among exporters, Toyota fell 2.6 percent to 3,740 yen, Canon Inc dropped 3.4 percent to 3,450 yen and Honda lost 3 percent to 2,780 yen. Smelter Sumitomo Metal Mining shed 2.4 percent to 1,478 yen, Mitsui Mining and Smelting fell 3.4 percent to 256 yen and Dowa Holdings lost 3 percent to 577 yen.
Trade was moderate, with some 1.8 billion shares changing hands on the Tokyo Exchange's first section compared to last week's daily average of 2 billion. Declining shares outnumbered advancing ones by nearly 6 to 1.