Nikkei marks 11-week low

Japan's Nikkei average fell 0.5 percent to a nearly three-month closing low on Wednesday as worries about tighter US and German financial rules rattled markets, spurring selling in the euro and other riskier assets. But short-covering helped the benchmark pare losses that earlier took it down nearly 2 percent.
Germany's sudden move to ban naked short selling in some securities and news that several Republicans will vote with Democrats to wrap up debate on sweeping financial reform sent US stocks lower. Naked short selling is when a trader sells short a financial instrument he does not possess, betting that its price will fall, without first borrowing the instrument or confirming if it can be borrowed.
"The concern is that the tighter regulations could spread throughout Europe, and this of course has spurred risk aversion," said Toshiyuki Katayama, a market analyst at Monex Inc. The benchmark Nikkei lost 55.80 points to 10,186.84 after earlier falling nearly 2 percent to 10,041.93, the lowest since mid-February and well below its 200-day moving average of around 10,350.
The Nikkei's relative strength index (RSI) fell to 35. Anything from 30 on down is seen as oversold. But longer-term movement indicators, such as MACD, still show no sign of turning upwards. Analysts said the situation remained volatile, particularly in regard to the euro. Digital camera maker Canon Inc fell 1.1 percent to 3,930 yen and chip tester maker Advantest Corp lost 0.6 percent to 2,183 yen, both well off earlier lows.
Sony Corp rose 2.7 percent to 2,911 yen on short-covering after two days of falls this week. Banks pared losses as well. Mizuho Financial Group was flat, Sumitomo Mitsui Financial Group lost 0.6 percent to 2,725 yen. Top lender Mitsubishi UFJ Financial Group turned positive, gaining 0.7 percent to 452 yen. Japan's largest bank by assets said on Tuesday it had returned to profit in the past year due to smaller writedowns, but is targeting annual growth that is below market expectations.
Toyota Motor Corp shed 0.6 percent to 3,510 yen after the world's biggest automaker said it plans to recall four models of its Lexus luxury car in Japan due to steering problems, its latest move in a series of massive recalls. Trade was moderate, with 2.5 billion shares changing hands on the Tokyo exchange's first section. Declining shares outnumbered advancing ones by more than 2 to 1.