Nikkei falls 1.35 pct after U.S. retreat

TOKYO, Oct 30 (Reuters) The Nikkei average fell to its lowest level in more than two weeks on Monday, ending the morning session down 1.35 percent as a retreat in U.S. stocks after data showing weak quarterly growth in the world's biggest economy dragged down exporters such as Toyota Motor Corp.

''The degree of the Dow's fall was not so big, but that certainly paused an uptrend this month,'' said Tamiji Shinada, executive director of Nomura Securities' investment research and investor services department, referring to Friday's 0.6 percent decline in the Dow Jones industrial average The Dow has hit a new closing record high in 13 of the past 18 sessions.

Tokyo's benchmark Nikkei average was down 225.65 points at 16,443.42 after falling as low as 16,411.90, its lowest since Oct.

12. The broader TOPIX index was down 1.27 percent at 1,629.78.

Earnings continue to be in focus. Major companies to release their results later in the day include Nippon Paper Group Inc. T> , Tokyo Gas Co. Ltd., Nippon Oil Corp., Mitsubishi Motors Corp., Mitsubishi Electric Corp., TDK Corp. and Kyocera Corp.

A fall in the dollar versus the yen also revived caution over earnings at Japanese exporters, market analysts said. A fall in the yen inflates exporters' earnings from abroad when repatriated to the Japanese currency.

Trade was slower, with 832.5 million shares changing hands on the Tokyo exchange's first section, compared with last week's morning average of 851.4 million shares. Decliners swept past advancers by a ratio of five to one.

OUTPUT DATA IN STRIDE The market mostly took in its stride data released before the opening which showed Japan's industrial production fell 0.7 percent in September from a month earlier, slightly better than a median market forecast of a 1.0 percent decline.

Yutaka Shiraki, a senior strategist at Mitsubishi UFJ Securities, said the headline number was in line with expectations and that a rise in inventories of electronic parts and devices could be temporary ahead of the year-end shopping season, given signs that U.S. individual spending remains strong.

''Instead of the domestic data, the market is rather reacting to a fall in U.S. stocks,'' Shiraki said. ''A rise in the yen is also negative, since weakness in the yen has been among key factors behind solid earnings reports,'' he said.

The dollar fell to a one-month low against the yen on Friday after data showing U.S. economic growth in the third quarter slowed to 1.6 percent, its weakest pace in over three years, reinforced expectations that the Federal Reserve would keep interest rates steady for a while.

Shares of Toyota, the world's second-biggest auto maker, lost 2.1 percent to 6,940 yen. Those of rival Honda Motor Co. Ltd. slid 2.3 percent to 4,170 yen.

Chip production equipment maker Advantest Corp. dropped 2.4 percent to 5,800 yen, becoming the second-biggest negative contributor to the Nikkei.

Advantest trimmed its full-year forecast on Friday to below market expectations amid slowing momentum in sales of chip testers.

Adding further pressure was a fall in shares of U.S. chip and chip equipment makers on Friday following a Goldman Sachs report which said demand for motherboards, a key computer hardware component, was falling.

The biggest negative contributor was Tokyo Electron Ltd., the world's second-biggest chip production equipment maker, which sank 3.5 percent to 8,750 yen.

Shares of Matsushita Electric Industrial Co. Ltd. fell 1 percent to 2,505 yen despite the world's No.1 maker of plasma display panel TVs having posted a 21 percent rise in first-half profit on Friday.

Credit Suisse lowered the target price for the maker of Panasonic goods to 2,850 yen from 3,000 yen after the earnings. ''The principal changes are that we lower our forecast of PDP pricing and materials cost increases in line with management's figures,'' the brokerage said in a note on Friday.

But shares of Fanuc Ltd., an industrial robot maker, rose 1.8 percent to 9,640 yen. The company raised its full-year operating profit forecast to above a market consensus after posting a 11.8 percent rise in profit in the first half, helped by healthy corporate capital spending.

Reuters SAM DB1041