Japanese stocks slid on Monday as investors wary of credit woes sold some financial stocks following Friday's rises, while an unexpected drop in capital spending data put a lid on the overall market.
But losses were curbed as Nippon Steel Corp, the world's second-biggest steelmaker, rose on a report that it would raise its dividend, and shipping stocks sailed higher after the Baltic Exchange's Dry Freight Index hit a record high.
Fujitsu Ltd ended 1.3 percent higher at 801 yen after the company won a multimillion-dollar order from Flag Telecom, the undersea cable arm of India's Reliance Communications Ltd.
Government data showed on Monday that Japanese firms cut capital spending by 4.9 percent in April-June from a year earlier, in sharp contrast with a median forecast by economists for an 11.5 percent rise.
The data was disappointing, said Yasuo Yabe, director of sales at Meiwa Securities. We would have liked to get a confirmation that the Japanese economy is OK, he said.
The Nikkei shed 0.27 percent, or 44.16 points, to 16,524.93. The Nikkei added more than 400 points on Friday on news that President George W. Bush would outline reforms to help homeowners with subprime mortgages.
The broader TOPIX index fell 0.17 percent to 1,605.44.
Yoshinori Nagano, chief strategist at Daiwa Asset Management, said the data showed that capital spending may be peaking out, but added that hopes are high that overseas demand would make up for the slack in the domestic market.
Capital spending by small and mid-sized firms is not as strong as before, he said. But what has been driving machinery companies is overseas demand.
Goldman Sachs said in a report on Monday that following the data, the April-June GDP estimate will be revised downwards from an initial figure of 0.5 percent quarter-on-quarter annualized growth to a decline of 1.2 percent. Still, Goldman said it was too early to be pessimistic.
We expect any dip in GDP to be temporary, however, and growth to turn upwards again in July-September, it said adding that production and shipments are robust, no major slowdown in personal consumption has been seen, and exports are growing.
Revised April-June GDP data is due out on September 10.
Trade was thin with 1.5 billion shares changing hands, compared with average daily volume of 2.1 billion shares in July, the last full month for which figures are available. Advancers slightly outnumbered decliners 807 to 793.
QUICK TO SELL
Shares of bank, insurance and brokerage firms fell as investors were quick to lock in profits after Friday's rises.
Mizuho Financial Group lost 1 percent to 726,000 yen and Nomura Holdings fell 1.7 percent to 2,015 yen, both snapping their two-day gains.
Earnings prospects lifted steel stocks and the Baltic Exchange's Dry freight Index, which measures the strength of seaborne trade for dry commodities, hit a fresh record high on Friday, helping shipping stocks to sail higher.
Nippon Steel added 1.5 percent to 824 yen after the Nikkei daily said it would likely pay an annual dividend of 11 yen per share, up 1 yen from a year earlier.
Kawasaki Kisen Kaisha Ltd jumped 3.4 percent to 1,547 yen and Mitsui O.S.K. Lines Ltd added 2.2 percent to 1,744 yen.
The shipping sector has proved to be resilient due to expectations for strong earnings. While the TOPIX has bounced up 8 percent since it hit this year's low on August 17, the Tokyo shipping subindex has recovered 20 percent.
A notable stock was cosmetics maker Shiseido Co which was up 2.5 percent at 2,475 yen after the cosmetics maker said on Friday it would buy back up to 25 billion yen worth of its own shares.