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Nikkei falls 1.5 pct after U.S. credit outlook cut

Published 04/18/2011, 11:14 PM
Updated 04/18/2011, 11:16 PM
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* Long-term impact from S&P cut on U.S. credit should be limited on Japan stocks-analysts

* Chip shares underperform on poor TI earnings

* More U.S. manufacturers' earnings may hit by Japan quake aftermath-analyst

* Volume may stay thin on Tue-analysts

By Ayai Tomisawa

TOKYO, April 19 (Reuters) - Japan's Nikkei average fell 1.5 percent on Tuesday after the yen climbed in the wake of Standard & Poor's warning that it might cut the United States' credit rating but market participants said they did not see any long-term impact on Tokyo equities.

Sentiment was also hurt after Texas Instruments Inc , one of the first major firms to report after Japan's March 11 earthquake and tsunami, said second-quarter revenue would be hurt by interruptions in production due to quake damage and power-supply disruptions at two plants in Japan. [ID:nN18221973]

Investors have been keeping to the sidelines ahead of U.S. and Japanese earnings, making for thin trade, waiting to see how much damage the fallout from the quake will inflict on earnings for global corporations this year.

"There will likely be more industries in the U.S. which may be affected by the March earthquake, such as the auto sector," said Tsuyoshi Kawata, a senior strategist at SMBC Nikko Securities, adding that Apple Inc is also in focus.

Apple may provide signs this week that the Japanese crisis is pressuring margins, clouding what should otherwise be another dazzling second quarter for the maker of the iPad and iPhone. [ID:nN18207676]

The benchmark Nikkei average fell 1.5 percent, or 142.66 points at 9,413.99, while the broader Topix shed 1.4 percent to 825.07. By comparison, U.S. stock indices ended around 1 percent lower on Monday.

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 U.S. 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 euro and dollar were steady against the yen in early trade after tumbling 1.9 percent and 0.6 percent, respectively, the previous day on an unwinding of carry trades.

Texas Instruments' results hit chip-related stocks with Advantest dropping 4.3 percent to 1,390 yen while Tokyo Electron shed 1.8 percent to 4,305 yen.

Sharp Corp fell 2.0 percent to 738 yen, after a source at Sony Corp told Reuters Sony will not raise its stake in a liquid crystal display production joint venture with Sharp for at least a year, delaying a plan to bolster production ties. [ID:nL3E7FJ01N]

TDK Corp slid 6.5 percent to 4,025 yen 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. [ID:nL3E7FH0IR]

(Additional reporting by Antoni Slodkowski)

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