Nikkei dips as Fast Retailing falls, futures down

TOKYO, Jan 11 (Reuters) The Nikkei share average edged down on Thursday as gains from Tokyo Electron Ltd. on higher orders for its chip-making gear were offset by falls in market heavyweights such as Fast Retailing Co. Ltd.

Market players said the spot market was mainly driven by trade in Nikkei futures ahead of the monthly settlement of Nikkei options on Friday.

Some speculated that a drop in oil prices to a 19-month low was prompting hedge funds to sell futures and stocks to compensate for losses in the energy market.

U.S. crude oil futures fell below on Thursday for the first time since June 2005 after exceptionally warm temperatures in the U.S. Northeast hit winter fuel demand.

''Buying by foreigners fuelled the latest rally in the Tokyo market. If they sustain losses from investment in the energy market, it should have an impact on Japanese equities,'' said Hiroyuki Fukunaga, chief strategist at Rakuten Securities.

Foreign investors were net buyers of Japanese stocks for the sixth straight week up to Dec. 22, helping the Nikkei climb to the highest level in seven months, the latest data from the Tokyo Stock Exchange showed.

The Nikkei was down 0.8 percent or 134.32 points at 16,808.08 at 0533 GMT, after losing 1.71 percent to its lowest close in three weeks in the previous session.

The broader TOPIX was down 0.46 percent at 1,655.35.

Nikkei futures expiring in March were down 0.65 percent at 16,840 in Osaka.

Tokyo Electron, which produces tools used to make microchips, gained 1 percent to 8,940 yen. Orders for its chip-making equipment rose 6.6 percent in October-December from the previous quarter to a six-year high, it said on Wednesday.

Shares of Oji Paper Co. and other Japanese paper makers rose after Credit Suisse raised its rating on the sector to ''overweight'' from ''market weight'', citing expectations for higher profits due to lower oil prices and industry alliances.

Matsushita Electric Industrial Co. Ltd. rose 1.3 percent to 2,320 yen after the maker of Panasonic products unveiled a business plan which targets a nearly 80 percent increase in operating profit over the next three business years.

But clothes retailer Fast Retailing fell 1.3 percent to 11,120 yen ahead of its earnings report later in the day. The company said last week its same-store sales fell more than 3 percent last month due to warm weather.

Shares in Fujiya Co. Ltd. lost 10.3 percent to 209 yen after the confectioner said it was halting output at its factories and stopping confectionery sales at its stores in Japan after finding it had shipped about 2,000 cream puff products using milk that had passed its sell-by date.

REUTERS CS RS1141