(Reuters) - Japan's Nikkei average eased from a three-month high to trade below 9,000 Thursday amid uncertainty over the outcome of the Greek bailout talks.
Despite a disappointing earnings season for many Japanese companies, market participants point to more signs of foreign investors coming back to Japanese shares amid increased liquidity for global financial markets after the Federal Reserve pledged to keep interest rates near zero until at least 2014.
Nissan Motor Co (7201.T) fell 1.6 percent after earnings on profit-taking but is still up 10.1 percent this year after shedding 10.5 percent last year.
It's just profit-taking. The stock has run quite nicely. We still think that foreigners are just slowly starting to come back to Japan, a trader at a foreign brokerage said, adding that he did not expect to stock to lose more than 2 percent on Thursday.
Nomura kept its buy rating on the company and its target price at 1,150 yen. The automaker posted a 3.6 percent rise in quarterly operating profit on the back of strong global sales and its full-year forecasts are among the highest projected within the domestic auto industry.
The benchmark Nikkei <.N225> slid 0.7 percent to 8,956.02, moving away from its 200-day moving average near 9,060. The broader Topix <.TOPX> fell 0.4 percent to 778.95.
Wall Street ended flat to higher overnight in thin trade, but underlying confidence in the U.S. economy kept the Dow hovering at its highest level in nearly four years.
Masayuki Doshida, senior market analyst at Rakuten Securities, said the market was still tentative about risk-taking, saying Nikkei's recent rally would be capped at 9,100 ahead of the options settlement on Friday.
In Europe, Greek political leaders ended marathon discussions on a 130 billion euro bailout plan with one issue of pension cuts unresolved.
The prime minister of the debt-ridden country said discussions with the International Monetary Fund, the European Central Bank and the European Commission will continue so a deal can be achieved ahead of the euro zone finance ministers' meeting later in the day.
The situation in Europe remains very uncertain, but you have to also keep in mind that they have delayed a decision on the debt-swap and the bailout for over a month now. I think most market participants are putting the negotiations to the side this point and will only react when there's a definite outcome.
Reaction to China's consumer price index data was muted.
China's annual inflation rate accelerated to 4.5 percent in January, well ahead of market expectations and breaking a five-month trend of easing price pressures as consumers ramped up spending during the Chinese Lunar New Year holiday season.
Troubled chipmaker Elpida Memory (6665.T) dropped 2.1 percent after gaining more than 9 percent in the previous session.
According to data from Data Explorers, Elpida was the most heavily shorted stock on the Tokyo exchange, with 18.1 percent of its shares out on loan, compared to an average short interest rate of 0.6 percent across the Topix index.
Sources told Reuters this week that Japanese chipmakers may face re-alignment as Renesas Electronics (6723.T) and two other big Japanese chipmakers are in talks to combine their struggling system chip operations in a government-backed deal.
Out of the 135 Nikkei companies that have reported earnings, 67 percent of them missed market expectations, Thomson Reuters StarMine data showed. This compares to 34 percent for S&P 500 companies.
(Additional reporting by Dominic Lau; Editing by Edwina Gibbs)