Nikkei average weakens

Japan's Nikkei share average edged lower on Wednesday as bank and steel shares slid, offsetting gains in exporters from a weaker yen following encouraging economic data from the United States and Germany. The Nikkei pared losses at the last minute to end down just 0.1 percent at 8,925.04 after facing resistance at its 200-day moving average of 8,959.67.
Banks and iron and steel companies - recent strong performers - came under heavy selling pressure amid low liquidity, with many investors away for Japan's "Obon" summer holidays. "Although the market is quiet we're still seeing some sharp moves as shares reverse with people selling off stocks that have risen recently, or else hunting for battered bargains," said Kenichi Hirano, operating officer at Tachibana Securities.
The Topix's iron and steel subindex sagged 2.6 percent, dropping to the 38.2 percent retracement of an 11 percent rebound since July 25, when it hit a 9-year intraday low. After rebounding 16.8 percent in the same period, Nippon Steel fell 2.4 percent after BNP Paribas cut its earnings forecast. BNP Paribas also dropped its price target for Kobe Steel Ltd to 75 yen from 100, contributing to the stock's 5.7 percent fall. Gree Inc sagged 7.3 percent after the social gaming company's full-year operating profit and earnings guidance for the business year ending June 2013 undershot market expectations.
Sumitomo Mitsui was one of the megabanks sold off, along with peers Mitsubishi UFJ Financial Group and Mizuho Financial Group, which lost between 0.6 and 2.2 percent. Struggling consumer electronics maker Sharp Corp sank 12.4 percent to 169 yen, its lowest level since December 1975 after Goldman Sachs warned of further downside risk and cut its price target, while Deutsche Bank downgraded its rating to 'sell' from 'hold'.
Japanese corporate earnings have been weak so far this quarterly reporting season, with 53 percent of the 154 Nikkei companies missing market expectations, data from Thomson Reuters StarMine showed. That compared with misses of 40 percent in the previously quarter's earnings season. The benchmark Nikkei is up 5.6 percent so far this year, underperforming a 10.6 percent rise in the pan-European STOXX Europe 600 index even though the region is grappling with a sovereign debt crisis.
The Topix carried a 12-month price-to-book ratio of 0.8, its lowest in four years and below STOXX Europe 600's 0.85 and S&P 500's 1.9, according to data from Thomson Reuters Datastream. The Topix eased 0.3 percent to 747.32 on Wednesday. Trading volume was relatively light, at 89.3 percent of i ts 90-day average.