Nikkei dips, Fanuc falls after GDP but Sony up

Tokyo, May 17: The Nikkei average dipped 0.17 percent on Thursday as Japan's growth data added to concerns about corporate capital spending, leading to selling of Fanuc Ltd.

and other machinery shares.

But Sony Corp. gained after issuing a solid earnings forecast and shares of other exporters advanced on a weaker yen, limiting losses in the Nikkei.

Japan's economy lost a little steam in January-March on a downturn in capital spending, reaffirming the market view that the Bank of Japan will hold off on raising rates at least until the third quarter.

Masaki Iso, chief investment officer at Yasuda Asset Management, said investors turned cautious as worries about corporate capital spending, raised by Tuesday's weak machinery orders data, strengthened after the GDP data showed capital expenditure fell for the first time in five quarters.

''I think many investors braced for a scenario that the economy will start picking up in April-June after a slowdown in January-March,'' he said. ''Now they are reviewing it since the timing of the upswing may be delayed.'' In the first quarter, a fall in capital spending was offset by a rise in personal consumption. But Iso said consumption may lose steam in April-June, as its strength in January-March is due largely to a change to the income tax system, which temporarily raised disposable incomes of individuals during the period.

The Nikkei closed down 30.40 points at 17,498.60. The broad TOPIX index shed 0.27 percent to 1,707.27.

GDP, the broadest measure of the economy, grew 0.6 percent in January-March from the previous quarter, the government data showed. The consensus forecast had been for a 0.7 percent rise.

The Bank of Japan, which had a morning to examine the growth figures, wrapped up a two-day meeting on Thursday and left interest rates unchanged at 0.5 percent, as widely expected.

''The data was not negative for the market, as it showed the economy is staying solid,'' said Yutaka Shiraki, senior equity strategist at Mitsubishi UFJ Securities. ''But the figures were not strong enough to draw active buying from investors.''

Fanuc Dips, Sony Jumps

Industrial robot maker Fanuc lost 0.2 percent to 11,080 yen, while the machinery sector index IMCHN.fell 0.24 percent.

Investors also sold shares of companies reporting weak earnings such as Meiji Dairies Meiji Dairies dropped 4.5 percent to 841 yen after Daiwa Institute of Research on Wednesday lowered its rating on the dairy food producer to ''3'' from ''2,'' citing a slowdown in earnings momentum in a tough operating environment.

Meiji forecast on Tuesday it would post a 3.8 percent fall in group operating profit to 22.7 billion yen for the year ending March 2008, saying high raw material costs and dwindling consumption of milk are likely to hurt its earnings.

But Sony rose 2.6 percent to 6,630 yen. The electronics and entertainment giant on Wednesday posted a wider quarterly loss due to deficits in its game unit, but forecast a sharp rise in annual profit on strong sales of LCD TVs and expectations that game unit losses will shrink.

Other exporters also rose with TDK Corp. up 1.3 percent at 10,650 yen, benefitting from the yen's slip to a three-month low against the dollar.

Among other notable gainers, Hoya Corp. jumped 3.2 percent to 3,900 yen after the high-tech glass maker appeared to have succeeded in a bid for Pentax Corp., bringing a month-long takeover spat to a conclusion.

Shares of Bull-Dog Sauce Co. Ltd. were untraded on the Tokyo exchange's second section, flooded with buy orders at 1,536 yen, up 15 percent from Wednesday's close.

U.S. hedge fund Steel Partners said on Wednesday it would start a tender offer for all of the shares of the Worcestershire sauce maker it does not already own at 1,584 yen per share.

Reuters>