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Nikkei retreats from 3-month high on ECB doubts

Reuters/Tokyo 21 Aug 12 | 01:14 PM

Japan's Nikkei share average retreated from a three-month high on Tuesday on creeping doubts over the European Central Bank's plan to tackle the region's debt crisis, although investors buying defensive stocks offered some support to the market.

Expectations that the ECB would take bold action to tackle the euro zone sovereign debt crisis have helped the Nikkei rebound 10 percent from a seven-week low touched on July 25. The Nikkei is up 8.3 percent so far this year.

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But the market is still awaiting further details of the ECB's plans, and the central bank on Monday quashed speculation about the form of its bond-buying programme, while there are signs of fatigue after the Nikkei's sharp run-up.

The Nikkei slipped 0.2 percent to 9,156.92 but held above its 26-week moving average at 9,149.50. The benchmark edged up 0.1 percent on Monday, hitting a three-month closing high for a second session in a row.

"The jury is out as to whether when we come back after the summer holidays, we will return to the old uncertainty that we saw going into the summer holidays," said Stefan Worrall, director of equity cash sales at Credit Suisse in Tokyo.

Worrall said investors would be watching for comments from European policymakers after they return from holidays as to how they would tackle the region's debt problems.

Some defensive stocks gained.

"There are some appetite for cyclical stocks, but on the balance most people want to really be careful," said a Tokyo-based analyst who declined to be identified.

Among defensive names he liked were telephone companies and convenience store operators.

Nippon Telegraph and Telephone Corp  advanced 0.6 percent, while mobile operators Softbank Corp and KDDI Corp  gained 1.4 and 0.9 percent, respectively.

Convenience store operators Seven & I Holdings Co, Lawson Inc  and FamilyMart Co Ltd were up between 1 percent and 1.5 percent.

But Japan Tobacco Inc <2914.T> dropped 1.7 percent after the Wall Street Journal said in its online edition that the European Union is investigating whether a sale of cigarettes by a Swiss-based unit of Japan Tobacco to a firm liked to cousins of Syrian president violated its sanction against Syria.

The broader Topix added 0.1 percent to 765.26 in light trade, with 1.23 billion shares changing hands, the second lowest level this year.

The market's recent rebound has further lifted the Topix's 12-month forward price-to-book ratio to 0.85, from a four-year low of 0.8 hit in the first week of August, data from Thomson Reuters Datastream showed. That compares with the U.S. S&P 500's 1.9 and the STOXX Europe 600's 1.36.

Caution urged on Sharp

Sharp Corp  rose 2.9 percent and was the most- traded stock on the main board by turnover after the Yomiuri newspaper said the embattled TV maker aims to cut 8,000 jobs or 15 percent of its global workforce, including 3,000 from the sale of two TV factories in China and Mexico.

But traders said Sharp shares were best to avoid as the company had a long way to recovery.

Short-selling in Sharp increased, with 92.21 percent of its stock that is available to be borrowed out on loan as of Aug 17, up from 92.15 percent on Aug 16, according to data provider Markit.

Economy-sensitive shippers were down 1.7 percent as the worst sectoral performers, while traders said a downgrade by SMBC Nikko Securities weighed on construction machinery maker Komatsu Ltd , which lost 2.8 percent.

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