Japanese stocks pared earlier gains to trade sharply lower by late-afternoon on Thursday after crude oil prices rose back above $40 a barrel in Asian trade, renewing concerns over their impact on the global economy. The benchmark Nikkei average <.N225> fell as much as two percent to 11,018.01 before firming slightly to 11,051.90 by 0445 GMT, down 190.44 points or 1.69 percent. It rose as high as 11,358.51 in the morning. The broader TOPIX index <.TOPX> was down 1.24 percent at 1,122.73, also erasing early gains. Major exporters including Pioneer Corp <6773.T> were sold as investors worried that higher oil prices could hamper economic recovery at home and overseas.
NYMEX crude regained ground above $40 a barrel on Thursday after a 5.6 percent fall overnight brought buyers back into the market amid scepticism extra OPEC supply can cool red-hot prices. The Organisation of Petroleum Exporting Countries (OPEC) will hold a meeting in Beirut from 0900 GMT on Thursday and is expected to agree to raise formal output limits. But investors were wary about whether any increase would be able to put a ceiling on oil prices. "Oil prices can't be set only by demand-supply balance. There are other factors like geopolitical issues and speculators' moves," said Masaharu Sakudo, an adviser at Tachibana Securities. "Nobody knows how high oil prices can rise from the current level and that's the biggest risk in the market now."
HIGHER RATES
Investors were also cautious about prospects of higher interest rates in the United States and China, Japan's top two export markets. The South China Morning Post, citing unidentified analysts, said on Thursday that China is set to raise interest rates and electricity prices to cool its overheating economy. Friday's release of U.S. monthly jobs figures is expected to shed light on when and by how much the Federal Reserve may raise interest rates from a four-decade low of one percent. High-end audio equipment maker Pioneer, which generates about two third of sales overseas, tumbled 2.50 percent to 2,730 yen. Sharp Corp <6753.T>, the world's largest maker of liquid crystal display televisions, fell 2.47 percent to 1,738 yen. Semiconductor testing devices maker Advantest Corp <6857.T> was down 3.29 percent at 7,050 yen ahead of a midquarter update by Intel Corp , the world's number one computer chip maker, due later in the day. Other notable decliners include Mitsubishi Motors Corp <7211.T>, down 7.48 percent at 198 yen after hitting a life low of 187 yen soon after the opening. The car maker, tainted by a recall scandal four years ago, said on Wednesday that it found about 160,000 cars spanning 17 models that may need to be recalled after looking into past practices of repairing safety-related defects secretly without issuing a formal recall as required by law. Japan's only loss-making car maker had announced a new medium-term business plan two weeks ago centring on a financial aid package worth $4 billion, mainly from its sister companies in the Mitsubishi group.///