Nikkei hits one-month low as machinery stocks fall

TOKYO, July 23 (Reuters) Japan's Nikkei average fell to its lowest in nearly four weeks on Monday with exporters such as Canon Inc.

down after a fall in U.S. stocks, while Komatsu Ltd., Japan's top construction machinery maker, lost ground after disappointing results from industry leader Caterpillar Inc.

But shares of Tokyo Steel Manufacturing Co Ltd climbed 5.3 percent to 1,945 yen after Japan's biggest construction-use steel maker on Friday raised its pretax recurring profit outlook to 27.5 billion yen from 25 billion yen for the year to March 2008.

Norihiro Fujito, general manager of Mitsubishi UFJ Securities' investment research and information division, said investors were taking profits largely on concerns about the outlook for the U.S.

market.

''The U.S. market could turn more volatile on weakness in financial stocks due to subprime mortgage problems, as even relatively solid earnings results could spark a sell-off after shares there had risen on overly optimistic profit expectations,'' he said.

''But losses may be limited as foreigners are putting money into blue-chip stocks with high liquidity such as Mitsubishi Heavy Industries on profit hopes.'' Still, Fujito said the market is unlikely to see aggressive trade this week ahead of a Japanese election this weekend.

Half the seats in the upper house of Japan's parliament are up for grabs in the July 29 poll, with the ruling Liberal Democratic Party seen faring poorly after funding scandals and voter anger over lost pension records.

The Nikkei average was down 1.17 percent, or 211.85 points, at 17,946.08 as of 0050 GMT, after hitting its lowest since June 28.

The broader TOPIX index retreated 1.31 percent to 1,752.98.

Shares of exporters fell, with Canon down 1.4 percent at 7,100 yen, while Kyocera Corp. lost 1.4 percent to 12,980 yen.

Komatsu declined 1.5 percent to 3,930 yen after rival Caterpillar announced on Friday that its quarterly earnings fell more than expected because of lower truck engine sales, weakness in North American construction markets and higher production costs.

Shares in smaller rival Hitachi Construction Machinery Co. were down 1.2 percent at 4,980 yen, while farm equipment maker Kubota Corp. dropped 2.6 percent to 1,075 yen.

Among gainers, shares of Mitsubishi Heavy rose 2.3 percent to 875 yen.

REUTERS CS PM0715