Nikkei inches down as profit-taking weighs

Tokyo, May 29: The Nikkei share average gave up early gains to close 0.34 percent lower on Monday on profit-taking in such index heavyweights as Tokyo Electron Ltd. after the index topped 16,000 for the first time in a week.

There were signs of foreigners selling more shares to cash in on recent gainers such as food stocks, while concerns about industrial output data due to be issued before the open on Tuesday also curbed buying.

Yumi Nishimura, manager at Daiwa Securities SMBC's investment advisory section, said if the data comes in stronger than expected, that would bolster the market which has been overshadowed by recent turbulence in the U.S. and emerging markets.

''But there are cautious views that the data could reflect corporate managers' conservative earnings outlooks for the current business year,'' she said.

Technical analysis of inventory cycles show signs that there will be an adjustment in inventory build-ups in the high-tech sector in coming months, but economists have said a protracted economic downturn is unlikely.

A Reuters poll of economists produced a median forecast of a 1.8 percent rise in production in April from March. The market also keeps an eye on forecast figures for May and June.

The Nikkei fell 55.08 points to 15,915.68, reversing an earlier rise to as high as 16,111.54. The index rose 1.77 percent on Friday.

However, the broader TOPIX index held on to gains on advances in shares of banks and steel makers, rising 0.15 percent to 1,616.17.

Steel makers such as Nippon Steel Corp. rose after European steel firm Arcelor said it would buy Russia's Severstal, sparking hopes that industry consolidation could boost steel makers' pricing power.

Japan's biggest steel maker Nippon Steel gained 0.7 percent to 431 yen. No.2 JFE Holdings Inc. advanced 1.7 percent to 4,860 yen.

Bank shares rose for a second session on Monday, following an industry-wide sell-off last week on news that the government would next month sell shares it holds in Mitsubishi UFJ Financial Group (MUFG) worth about 480 billion yen (.28 billion).

The sale is part of an effort by the bank, created in a merger last October, to replay taxpayers' funds injected into one of the bank's predecessors in the 1990s.

Shares of MUFG, the world's biggest bank by assets, rose 2.7 percent to 1.54 million yen. Rival Mizuho Financial Group Inc. was up 0.3 percent at 920,000 yen.

In contrast, Tokyo Electron, the world's second-biggest chip equipment maker, was down 2.4 percent at 8,040 yen. Industry robot maker Fanuc Ltd. fell 0.6 percent to 10,210 yen.

Another Nikkei heavyweight Canon Inc., the world's biggest digital camera maker, lost 1 percent to 8,050 yen.

Profit-taking pulled down Japan Tobacco Inc., the world's third-biggest tobacco company, which lost 2.7 percent to 402,000 yen. The stock hit a share-split adjusted lifetime high of 477,000 yen last month.

With market holidays in Britain and the United States on Monday, trade saw its slowest day in nearly four weeks with just 1.55 billion shares changing hands on the Tokyo exchange's first section.

Decliners beat advancers, 878 to 692.

Reuters