Nikkei average falls

The Nikkei stock average lost ground in thin trade on Monday, hurt by a surprise fall in Japanese machinery orders, further signs of a global economic slowdown and share declines for Toyota Motor Corp after a weaker-than-expected earnings forecast. Japan's core machinery orders unexpectedly dropped in April in a sign that disruptions to energy supplies are impeding capital expenditure although demand should later rise when the country rebuilds its earthquake-ravaged north-east coast.
The figures followed news that China's May exports to the United States and the European Union slumped to their weakest since late 2009, excluding Lunar New Year holidays, underlining the view that the world economy is stumbling, which pushed US stocks lower on Friday. "The market has been hit by a double whammy today of both negative external and domestic factors," said Hajime Nakajima, deputy general manger at Cosmo Securities.
In another negative for risk assets like stocks, the euro tumbled more than 1 percent on Friday against the US dollar as fears about Greece's debt returned to the forefront and investors curbed expectations about the European Central Bank's interest-rate hikes. The benchmark Nikkei fell 0.7 percent to 9,448.21, while the broader Topix shed 0.6 percent to 812.26.
Turnover hit the lowest daily total for this year at 900.1 billion yen, while volume fell to 1.44 billion shares on the Tokyo stock exchange's main board, below the 25-day moving average of 1.57 billion shares. On one hand, analysts say Tokyo shares still look attractive with about 63 percent of stocks listed on the Tokyo exchange's main board trading at or below book value compared to around 2.1 times book value for stocks in the benchmark S&P 500 .
But with Japanese politics once again dominated by the prospect of a change in prime minister, policy deadlock and an uncertain passage for reconstruction-related bills, some say there's not a lot likely to drive the Tokyo market higher. "Domestic-demand shares may not be attractive as long as there is uncertainly in the fiscal policy such as a supplementary budget," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
Toyota Motor on Friday forecast a larger-than-expected 35 percent fall in annual profit on Friday and warned that the strong yen was making it difficult to justify keeping production in Japan. Toyota dropped 2.4 percent to 3,220 yen, and rivals also fell with Nissan Motor shedding 1.1 percent to 784 yen and Honda Motor falling 2.5 percent to 2,911 yen. Japan Tobacco fell 3.5 percent to 303,500 yen. The company announced a steep fall in domestic cigarette sales for April and May, after damage to production facilities from the earthquake forced it to reduce the number of brands it offers.
Kansai Electric Power Co, Japan's second-largest power company, fell 2.0 percent to 1,157 yen after the utility on Friday asked customers to reduce power consumption to make up for lost capacity, prompting brokerage Morgan Stanley UFJ cut its target share price to 1,400 yen from 1,900 yen.