(Adds stocks, details)
By Elaine Lies
TOKYO, Jan 7 (Reuters) - Japan's benchmark Nikkei average hit
a new 17-month low on Monday, slumping 1 percent as fresh worries
over the U.S. economy prompted investors to dump chip shares.
Wall Street took a beating on Friday after the release of
poor U.S. jobs data led to concern that the world's largest
economy might be heading into recession, but a sharp slide in
Japanese shares on Friday plus factoring in of the jobs data
helped limit Monday's fall in Tokyo.
U.S. chip shares had been especially hard hit on fears that
businesses are unlikely to upgrade computer equipment in the face
of an economic slowdown, and this dragged down Japanese
semiconductor-related shares such as Tokyo Electron <8035.T>.
"This is a level where investors want to pick up bargains,
and there was some short-covering in futures that also helped
lift the Nikkei from its lows this morning," said Takahiko Murai,
general manager of equities at Nozomi Securities.
"But there's still the chance of volatile moves, although the
lack of significant U.S. economic indicators later today may help
limit further falls."
The U.S. Labor Department reported on Friday that job
creation nearly ground to a halt in December and the unemployment
rate rose to a two-year high of 5 percent, stoking fears of a
recession and sending Wall Street tumbling.
Japanese market players said falls were likely to be limited
for now due to technical factors, although the overall trend was
still likely to be lower for a while.
The Nikkei 225's 14-day relative strength index is now at
about 26.5, below the 30 "oversold" line, which usually indicates
limted downside in the near term.
The Nikkei <> ended morning trade down 147.29 points at
14,544.12, after earlier falling as low as 14,438.61. The broader
TOPIX <> was down 1.1 percent at 1,396.53.
The Nikkei tumbled 4 percent on Friday to its lowest close in
17 months.
"We'd expected the Nikkei to be weak during January, the
weakness just came a little sooner than expected," said Nagayuki
Yamagishi, a strategist at Mitsubishi UFJ Securities.
Still, the Nikkei was outperforming other Asian markets. At
0254 GMT, MSCI's measure of Asia Pacific stocks excluding Japan
<.MIAPJ0000PUS> was down 2.29 percent.
SEMICONDUCTORS SLIDE, DRUGS HIGHER
Poor sentiment on semiconductor-related shares carried over
from U.S. trade on Friday to hit Japanese chip stocks on Monday.
Chip equipment maker Tokyo Electron fell 3 percent to 6,180
yen, stepper maker Nikon Corp <7731.T> lost 4.1 percent to 3,530
yen, and chip packages maker Kyocera Corp <6971.T> slipped 1.4
percent to 9,430 yen, all helping to drag the Nikkei lower.
Tokyo Electron was also hit by a ratings downgrade by
Mitsubishi UFJ Securities, which cut the issue to "3" from "2"
and said all positive news that might lift the stock had already
been factored in.
Defensive shares such as pharmaceuticals defied the bearish
trend to forge into positive territory.
Eisai Co Ltd <4523.T> rose 1.2 percent to 4,310 yen, while
Daiichi Sankyo <4568.T> rose 1.8 percent to 3,470 yen. Takeda
Pharmaceutical Co <4502.T> gained 1.1 percent to 6,400 yen.
Fast Retailing Co Ltd <9983.T> reversed earlier losses and
jumped 2.7 percent to 8,020 yen after the company said on Friday
that same-store sales at its Uniqlo casual-clothing chain rose
6.4 percent in December from a year earlier.
Trade picked up, with 981 million shares changing hands on
the Tokyo Stock Exchange's first section, compared with a morning
average of 724 million for the final week of December.
Declining shares outnumbered advancing ones by nearly three
to one.
(Reporting by Elaine Lies; Editing by Hugh Lawson)
