Nikkeis worst week in over a year

Market worried European debt crisis may hurt financial system.

Risk stands reduced as investors worry over the European crisis. Japan8217;s Nikkei average posted its biggest weekly drop in more than a year on Friday,as investors reduced holdings of riskier assets including equities on deepening worries about disunity in the euro zone on its debt crisis.

A lack of policy coordination in Europe and fears that Germany may force weaker euro zone members out have rattled investors,leading them to cut back on positions in riskier assets and boost cash holdings while they wait for calm to return to the market.

Deepening worries that the debt crisis might hamper the global financial system are pushing investors to sell Japanese stocks,which likely poses a bigger risk here than one that might come from economic risks,said Masaru Hamasaki,a senior strategist at Toyota Asset Management.

Investors are shifting toward cash as you can see from such moves as investors were even selling gold yesterday. There8217;s uncertainty over the extent of the fallout from the crisis,such as whether it would end up leading to a halt in financial trades like after the Lehman shock.

On the week,the Nikkei fell 6.5 percent,its biggest weekly drop since January 2009.

That compares with a 5 percent fall so far this week in the Dow Jones Industrial Average and a 4 percent decline in the FTSEurofirst 300 index of top European shares as well as in Shanghai stocks.

The benchmark Nikkei ended Friday down 2.5 percent at 9,784.54,its lowest close in more than five months.

The broader Topix fell 2.1 percent to 879.69.

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The Nikkei8217;s relative strength index RSI stood around 28. Anything from 30 and below is considered oversold.

Market players said falls in the market so far appeared inevitable given sharp slides in overseas markets,though some short-covering emerged at its lows.

Still,uncertainty remains as to at what point stocks would stop falling and eyes are on performance in overseas stocks and the currency market,they said.

The Nikkei8217;s next target is seen around its November low at 9,076,which also roughly coincides with a 50 percent retracement of its 2009-2010 rebound.

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What may change change sentiment like this is usually policy steps such as providing liquidity,said Kazuhiro Takahashi,general manager at Daiwa Securities Capital Markets.

U.S. stocks sank about 4 percent on Thursday on growing fears the euro zone8217;s efforts to tackle its sovereign debt crisis will fall short,jeopardising the global economic recovery.

EXPORTERS HIT,SONY UP

Worries about a stronger yen hurt shares of exporters after the euro slipped to its lowest against the yen since November 2001 below 110 yen the previous day. It rebounded to trade around 113.20 yen in Asia on Friday.

Investors fret about a stronger yen as it curbs exporters8217; profits when repatriated. Many Japanese exporters have set their currency assumption rates for euro/yen around 120-125 yen.

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Canon Inc fell 2.6 percent to 3,725 yen and TDK Corp shed 3.6 percent to 5,440 yen. Honda Motor Co skidded 2.5 percent to 2,823 yen.

Toyota Motor Corp lost 1.9 percent to 3,355 yen. Toyota and electric carmaker Tesla Motors plan to partner on electric vehicles in California.

Among rare gainers,Sony Corp rose 0.6 percent to 2,884 yen after the Japanese electronics maker said it was teaming up with Google Inc on Web television.

Sony and Google,along with microchip maker Intel Corp,have said the the TV sets,dubbed Google TV would be ready in time for the Christmas season.

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Mizuno Corp rose 1.5 percent to 398 yen after the sporting goods maker forecast operating profit to jump 44 percent to 4 billion yen in the year ending March 2011 on brisk sales of running shoes and golf equipment.

Trade was moderate,with 2.6 billion shares changing hands on the Tokyo exchange8217;s first section,the second-highest daily volume this week. Declining shares outnumbered advancing ones by nearly 19 to 1.