Nikkei hits three-week low

Tokyo stocks hit a three-week low on Tuesday after chipmaker Texas Instruments warned the impact from Japan's earthquake last month would result in slower sales growth and after the yen climbed on Standard & Poor's threat to cut its US credit rating.
While market participants said that the impact from the S&P's move would likely be temporary, weaker US earnings have begun to reveal the severity of the state of global supply chains after the March 11 quake, putting more pressure on shares before Japanese firms start reporting next week. Texas Instruments said it was contending with supply shortages as well as damage to its own factories and those of its customers in Japan.
"We need to look at demand. We already know about problems with supplies due to the quake, but I'm worried that if a drop in demand is behind TI's weaker earnings, that may dampen the sentiment for stocks further," said Kiyoshi Noda, chief fund manager at MU Investments.
In thin trade, the Nikkei fell 1.2 percent or 115.62 points to 9,441.03, breaking out a trading range between 9,516 and 9,822 that had been in place for the last few weeks. Decliners outnumbered advancers 1,281 to 274. The broader Topix shed 1.1 percent to 827.56. Already hit by fears that Greece will have to restructure its mountain of debt, Standard & Poor's threat to downgrade the United States' prized AAA credit rating sent the yen rising broadly as it provided investors with a timely excuse to dump long positions on currencies like the Aussie dollar.
"S&P's downgrade of its US credit outlook may have a short-term impact on Japan stocks in terms of concerns about the stronger yen," said Makoto Nagahori, head of sales trading at Instinet. "But its long-term impact should be limited." The yen extended gains on Tuesday as more market players cut back on carry trades, but the move will likely be short-lived as hedge funds and Japanese life insurers positioned for the yen to resume its slide before long.
Trading volume on the Tokyo stock exchange's first section was 1.8 billion shares, below last week's daily average of 2.1 billion. The BoJ's data showed the bank has bought 107 billion yen in exchange traded funds since the March 11 quake, usually stepping in when the market lost more than one percent.
Upcoming earnings in focus include Apple Inc, which may provide signs that the Japanese crisis is pressuring margins while Japanese firms reporting next week include Honda and Canon. Texas Instruments' results hit chip-related stocks with Renesas falling 5.4 percent to 678 yen and Advantest dropping 3.2 percent to 1,405 yen.
TDK Corp plunged 7.6 percent to 3,980 yen in heavy trade after Goldman Sachs cut the firm's target price, saying TDK earnings could be hit if Samsung Electronics, which sources HDD heads exclusively from TDK, sells its HDD operations to Seagate Technology, a possibility that has been reported by the Wall Street Journal.