Japans Nikkei average fell 0.4 percent in see-saw trade on Monday, weighed down by defensive stocks, while automakers such as Toyota Motor gained on growing optimism about the health of the global economy. Investors were keenly awaiting US bank results due this week, keeping trading activity in check, but sentiment was expected to stay upbeat after Wells Fargo posted better-than-expected quarterly results.
Fast Retailing Co Ltd extended a tumble that began on Friday as investors locked in profits after recent sharp gains, with fellow retailer Seven & I Holdings also slipping after last week predicting flat profits. But Marubeni Corp, Japans fifth-biggest trading firm, jumped 9 percent after signing a deal with China Grain Reserves Corps wholly owned subsidiary that includes procuring grain for the state-run agency.
"Investors were taking a wait-and-see stance ahead of earnings from US financial institutions, coupled with needs to take profits after a market rally," said Masaru Hamasaki, senior strategist at Toyota Asset Management. Among major US banks, Goldman Sachs is set to report earnings on Tuesday. J.P. Morgan is due to report results on Thursday and Citigroup on Friday.
"Still, theres no change in the picture that worries about exporters earnings have receded due to a weakening yen, and Japans stimulus plan has sparked slight hope that that will help stocks related to domestic demand," Hamasaki said. After moving in and out of positive territory, the benchmark Nikkei dipped 39.68 points to 8,924.43. It hit a three-month closing high on Friday to post its fifth consecutive week of rises.
The broader Topix rose 0.4 percent to 848.97. Despite the Nikkeis dip, market watchers said investor confidence appeared to remain solid. "The number of bullish investors has increased dramatically, and that is prompting the shift of funds from defensive stocks to cyclical or financial shares," said Soichiro Monji, chief strategist at Daiwa SB Investments.
Fast Retailing shares lost 5.8 percent to 10,130 yen, extending a Friday tumble despite lifting its forecast for a second time on strong sales of its Uniqlo casual clothing line. Seven & I Holdings dropped 5.2 percent to 2,105 yen. The two retailers were the top drags on the Nikkei 225 by volume weight. Among defensive stocks, drugmakers Chugai Pharmaceutical fell 1.4 percent to 1,675 yen and Daiichi Sankyo shed 1.9 percent to 1,712 yen.
Cosmetics maker Shiseido slipped 1.6 percent to 1,514 yen, while Tokyo Gas Co declined 1.5 percent to 341 yen. Shares of Daikin Industries Ltd fell 1.9 percent to 2,820 yen after the air conditioner maker said on Friday its profits had been inflated by 3.3 billion yen through inappropriate accounting over the 10 years through March 2008.
Among stocks that gained, Toyota rose 0.8 percent to 3,940 yen after a lower opening. The Nikkei business daily reported at the weekend that Toyotas operating loss could climb to more than 500 billion yen this business year, in line with a median forecast of 550 billion yen in a survey of 19 brokerages by Reuters Estimates.
Honda Motor Co added 0.5 percent to 2,830 yen and Nissan Motor climbed 2.5 percent to 524 yen. Hopes for the economy broadened to include China after central bank data on Saturday showed the countrys banks lent a record amount in new local currency loans, the latest sign that the economy is gaining steam, boosting shares in trading firms.
Marubeni shares surged to 401 yen. Fellow trader Mitsubishi Corp jumped 4 percent to 1,607 yen and Mitsui & Co gained 3.7 percent to 1,206 yen. Top lender Mitsubishi UFJ Financial Group advanced 2.7 percent to 531 yen, though its smaller rivals gave up initial gains to end the day down, with No 2 bank Mizuho Financial Group shedding 1 percent to 196 yen.
Sumitomo Mitsui Financial Group, Japans third-largest bank, extended losses to fall 2.3 percent to 3,040 yen after it said it faced a net loss of $3.9 billion for the financial year just ended and will raise as much as $8 billion through the sale of shares.
On Friday, Sumitomo Mitsui finished the day flooded with sell orders at 3,110 yen, 13.9 percent lower than Thursdays close. Trade picked up slightly on the Tokyo exchanges first section, with 2.59 billion shares changing hands, compared with last weeks daily average of 2.54 billion. Advancing shares outnumbered declining ones, 982 to 605.