Tokyo shares end morning lower on caution ahead of Citigroup earnings - UPDATE

Japanese shares ended the morning session lower on Friday after investors retreated to the sidelines to await the release by Citigroup Inc of its first-quarter earnings. Stocks opened higher as investors covered short positions following better-than-expected earnings from internet search leader Google Inc. while the yen stabilised against the U.S. dollar. After the close of trade in the U.S., Google said its first-quarter earnings rose 30 percent, beating market forecasts. But the Nikkei soon lost steam with an uncertain outlook for the credit markets and the U.S. economy weighing on sentiment.

"The local market has remained firm. Investors seem to be relieved that the writedowns by banks including Merrill Lynch Co have so far been within market expectations and the earnings of blue-chip companies remain favourable, but they are still reluctant to make a fresh move until Citigroup's earnings have come out," said Yoshikiyo Shimamine, chief economist at Dai-Ichi Life Research Institute. The Nikkei 225 Stock Average ended the session down 23.09 points or 0.2 percent at 13,375.21, off a low of 13,373.30. The broader Topix eased 3.04 points or 0.2 percent to 1,290.28 after falling to as low as 1,289.94. Decliners outnumbered gainers 1,041 to 533, with 138 issues unchanged. Volume was thin at 658 million shares, compared with 880 million shares traded on Thursday morning. Overnight, Wall Street closed an erratic session with a slight 0.01 percent gain for the Dow Jones industrial average while the tech-heavy Nasdaq was down 0.35 percent following mixed reports of earnings and lower-than-expected economic data.

Merrill Lynch reported a first-quarter loss of $2.14 billion after writing down the value of subprime-related assets, but Chief Executive John Thain said that business conditions in April appear better than in the first quarter. The Philadelphia Federal Reserve announced its index of regional manufacturing activity stood at negative 24.9 in April, down from negative 17.4 in March. Shipping companies were firmer, with Nippon Yusen up 1.5 percent at 976 yen, Mitsui OSK Lines up 2.2 percent at 1,321 and Kawasaki Kisen Kaisha up 5.4 percent at 1,052. Auto issues gained after the open and ended the session higher, with Toyota Motor up 1.6 percent at 5,090 yen, Nissan Motor up 1.6 percent at 881 yen and Honda Motor up 1 percent at 3,050 yen. Video game maker Nintendo advanced 3.2 percent to 54,300 and major steel manufacturer JFE Holdings rallied 3.5 percent. Aeon Co rose 1 percent to 1,264 yen on a report that the supermarket chain operator plans to close around 100 stores operated by its U.S. subsidiary in a bid to revive earnings. Seiko Epson gained 0.5 percent at 2,770 yen on a report that the company is likely to post a group operating profit of some 61 billion yen for the year ended March 31, a 21 percent rise from the previous fiscal year on a strong performance by its mainstay inkjet printers in Japan and abroad. Banks were weaker as investors cashed in profits from recent gains Mizuho Financial was 1.9 percent lower at 459,000 yen, Sumitomo Mitsui Financial down 1.3 percent at 738,000 yen and Mitsubishi UFJ Financial down 0.4 percent at 1,000 yen. ($1 = 102.49 yen) masami.hachisu@thomson.com

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