*Nikkei down 3.2 percent at three-year low
*Financial shares hit by global credit fears
*Sony plunges after Goldman downgrade
(Adds stocks and comments)
By Taiga Uranaka
TOKYO, Sept 18 (Reuters) - The Nikkei share average fell 3.2
percent to a three-year low on Thursday as credit fears roiled
global markets despite efforts by the U.S. government to prevent
a financial meltdown.
The sharp fall came a day after the Tokyo market rose on
relief over the U.S. rescue of insurer AIG <AIG.N>.
Financial shares suffered steep declines, with Japan's
third-largest lender Sumitomo Mitsui Financial Group <8316.T>
down more than 7 percent, as their Wall Street peers were
pounded.
Sony Corp <6758.T> plunged after a Goldman Sachs rating
downgrade, and other exporters such as Honda Motor Co Ltd
<7267.T> dragged down the benchmark index amid growing concern
about the impact of the financial crisis on the broader economy.
"Credit fears have now reached a climax. It's presumptuous to
assume it would end in one day," said Harushige Kobayashi, head
of the research department at Securities Japan, a brokerage.
"The market ignores fundamentals and is now 95 percent driven
by psychological factors," he said.
U.S. stocks dropped to a three-year low on Wednesday as the
U.S. rescue of insurer AIG failed to calm a crisis of confidence
in global markets and banks were scared to lend to each other.
Investors worldwide are pulling their money out of equities
and other risky assets amid mounting worry about the fallout of
the ongoing financial sector turmoil.
"Investors are too scared to buy equities," said Katsuhiko
Kodama, senior strategist at Toyo Securities.
The Chicago Board Options Exchange Volatility Index <.VIX> or
VIX, Wall Street's main barometer of investor fear, closed on
Wednesday at its highest level in almost six years.
The benchmark Nikkei average ended the morning down 374.22
points at 11,375.57, its lowest level since June 2005. The
broader Topix <> fell 3.4 percent to 1,083.85.
SONY DOWN
Sony plunged 9.5 percent to 3,240 yen, becoming one of the
top drags on the Nikkei, after Goldman Sachs cut its rating to
"neutral" from "buy", citing increasing risks to its liquid
crystal display TV, digital camera and mobile phone businesses.
Honda lost 4.8 percent to 3,150 yen and Toyota Motor Corp
<7203.T> fell 3.7 percent to 4,420 yen.
Top lender Mitsubishi UFJ Financial Group <8306.T> shed 4.6
percent to 763 yen and Sumitomo Mitsui declined 7.4 percent to
577,000 yen.
On a bright note, Sumitomo Metal Mining Co <5713.T> rallied 4
percent to 1,086 yen as gold <XAU=> advanced after posting a
record one-day gain in dollar terms the previous day, with
investors buying safe-haven gold as stocks plunged.
Trade slowed on the Tokyo exchange's first section, with 941
million shares changing hands, compared with last week's morning
average of 1 billion shares.
Declining stocks outpaced advancing ones by more than 5 to 1.
(Editing by Chris Gallagher)
