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Nikkei slides 2.3 pct, weak data dampens sentiment

Published 07/08/2009, 01:22 AM
Updated 07/08/2009, 01:40 AM
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* Nikkei hits 6-week low, poised for 6 straight days of falls

* Exporters dragged lower by strong yen, economy doubts

* Machinery stocks hurt after unexpected fall in May orders

By Shinichi Saoshiro

TOKYO, July 8 (Reuters) - Japan's Nikkei average fell 2.3 percent to six-week lows on Wednesday, hurt by an unexpected slide in domestic machinery orders and as the yen rose to seven-week highs against the dollar on talk of more stimulus for the U.S. economy.

Komatsu and other machinery makers dropped after Japan's core private-sector machinery orders fell 3.0 percent in May from the previous month, suggesting a recovery in capital spending may be delayed.

Market analysts say the equity market has been going through a reality check after data on Thursday showed U.S. employers had shed nearly half a million jobs in June with the unemployment rate jumping to 9.5 percent, the highest in nearly 26 years.

"Market sentiment has deteriorated at a faster-than-expected pace following the weak U.S. employment data and the adjustment phase could be a long drawn-out one," said Takashi Kamiya, chief economist at T&D Asset Management.

Poised to put in its sixth straight day of losses, the benchmark Nikkei lost 221.84 points to 9,425.95. It fell as low as 9,407.98, its lowest level since May 28.

Analysts said selling by some short-term investors accelerated after the Nikkei touched its 13-week moving average of around 9,450.

The broader Topix fell 2.3 percent to 888.47.

Nervousness also prevailed ahead of U.S. earnings due later in the day including bellwether Alcoa.

An adviser to President Barack Obama said on Tuesday the United States should be planning for a possible second round of fiscal stimulus to further prop up the economy after the $787 billion rescue package launched in February.

That heightened fears that an economic recovery will be slow and that the corporate earnings season starting this week will be weak, sending the Dow Jones industrial average to its lowest close since April 28.

"The jobs situation is still deteriorating and that's capping a recovery in consumption," said Takahiko Murai, general manager of equities at Nozomi Securities.

Komatsu shed 4 percent to 1,378 yen. Kubota Corp dropped 4.4 percent to 732 yen and Hitachi Construction sank 4.3 percent to 1,429 yen.

Honda declined 5.5 percent to 2,490 yen and Toyota Motor Corp fell 3.6 percent to 3,460 yen. Tokyo Electron slumped 5.2 percent to 4,340 yen.

Shares of Aeon Co Ltd, Japan's second largest retailer, fell 3.6 percent to 846 yen after it posted a 62 percent drop in operating profit for March-May as a slide in consumer spending hit its supermarkets and its U.S. women's clothing unit Talbots. (Additional reporting by Aiko Hayashi; Editing by Edwina Gibbs)

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