Nikkei down as techs fall, but steel firms gain

TOKYO, June 26 (Reuters) The Nikkei average shed 0.56 per cent on Monday, as shares of technology firms and exporters such as Pioneer Corp. declined on concerns U S rate increases would dampen consumer demand in a key market.

Steel makers such as Nippon Steel Corp. gained on expectations of further consolidation in the industry after Europe's Arcelor bowed to an improved takeover bid from Mittal Steel on Sunday, creating a world giant three times larger than its nearest rival.

Concerns about further interest rate rises and their impact on demand for Japanese goods were keeping investors from picking up shares in exporters, market participants said.

''Shares in high-techs are a little difficult to buy at the moment ... instead, shares of firms that rely on domestic demand, such as steel makers or real estate, seem to be faring better,'' said Katsuhiko Kodama, senior strategist at Toyo Securities.

While financial markets expect the U S Federal Reserve to raise rates for the 17th straight time on Thursday, investors will be looking at the Fed's statement for hints on the central bank's future actions, he added.

''I think a rate rise this time is fully factored in, so the focus will be on the statement, to see what kind of comments they make about inflation.'' The Nikkei was down 84.51 points at 15,039.53 as of 0107 GMT. The TOPIX index was down 0.45 percent at 1,538.59.

Consumer electronics firm Pioneer fell 1.3 percent to 1,793 yen.

The company made 64 percent of its sales overseas in the year to March 2005. Sony Corp. declined 0.6 per cent to 4,920 yen.

Nippon Steel, Japan's top maker, rose 1.7 percent to 417 yen, as investors bet the industry was likely to see further consolidation following news of a merger of the world's two top makers.

JFE Holdings Inc., Japan's second-largest steel maker, gained 1.1 percent to 4,570 yen.

REUTERS SK BST0655