Tokyo stocks down 1.40pc by noon amid eurozone woes

TOKYO: Tokyo stocks fell 1.40 percent Tuesday morning amid worries over Europe's stability after a major ratings agency downgraded Italy's sovereign debt.

The benchmark Nikkei 225 index at the Tokyo Stock Exchange fell 124.42 points to 8,739.74 by the lunch break. The Topix index of all first-section issues sank 11.71 points or 1.52 percent to 756.42.

Tokyo was closed on Monday, when markets fell around the world, and reopened soon after Standard & Poor's downgraded Italy's sovereign debt rating, citing economic, fiscal and political weaknesses in the eurozone's third-largest economy.

The ratings agency said it had downgraded Italian debt to "A/A-1" from a "A+/A-1+" grade, adding Italy's weak governing coalition would "limit the government's ability to respond decisively" to events.

Brokers said stocks were under pressure due to a weaker euro against the yen after the S&P downgrade, as well as disappointment over the lack of progress on Greece's debt problems following a weekend meeting of eurozone finance ministers.

"The S&P downgrade itself is not a surprise, but the concern is whether Greek's sovereign debt crisis will spread to Italy and Spain," said Hiroichi Nishi, general manager at SMBC Nikko Securities.

Yoshihiro Okumura, general manager at Chibagin Asset Management, said that "the (market) tone has completely changed from Friday following the lack of progress at the EU finance ministers' meeting."

"Investors were reminded once again that the level of (European) sovereign risk has not changed at all," he told Dow Jones Newswires.

The euro bought $1.3642 and 104.39 yen in Tokyo morning trade, down from $1.3679 and 104.89 yen in New York late Monday.

Companies with large exposure to Europe fell, with Sony tumbling 4.18 percent to 1,512 yen.

Mitsubishi Heavy Industries skidded 2.73 percent to 320 yen after it said Sunday that 45 servers and 38 computer terminals were infected with viruses in Japan during a cyber attack in mid-August.

The company, which makes warships, submarines and other defence-related equipment, said it has not discovered any leak of sensitive information.

Suzuki Motor jumped 4.28 percent to 1,679 following a report in German weekly magazine Der Spiegel that Volkswagen has not ruled out taking a majority stake in the Japanese vehicle manufacturer.

Suzuki last week said it wants to unwind the tie-up with Europe's largest automaker and that it is aiming to buy back the 19.9 percent stake Volkswagen acquired in Suzuki in 2009.

Copyright AFP (Agence France-Presse), 2011