Nikkei falls to technical level eyed as sales trigger

Japan's Nikkei stock average hit a 1-month-low to end just under a key technical level on Monday, hurt by volatile commodities as well as concerns about global growth and market participants said a decisive break below thatlevel could trigger further losses.

Banks and utilities lost further ground on worries about how much they will have to contribute to help troubled nuclear operator Tokyo Electric Power (Tepco) compensate victims of the crisis at its tsunami-hit nuclear plant.

The mood was also soured after Goldman Sachs downgraded its recommendation on Japanese stocks to "underweight" from "market weight", citing a weaker global macro backdrop, supply chain and electricity supply problems after the March 11 earthquake as well as a stronger yen.

"We have entered a 'risk-off' stage in Tokyo. The earnings season is slowly coming to an end so traders are again shifting their focus from micro factors like earnings to the broader macro picture," said Makoto Kikuchi, chief executive officer at Myojo Asset Management.

The benchmark Nikkei average ended down for a third straight day, losing 0.9% to 9,558.30, while the broader Topix shed 1.2% to 829.55.

Analysts said a decisive break below its closing level may push the Nikkei to the bottom of its daily Ichimoku cloud at 9,533,88, and if that level is then broken, it would be a major bearish signal triggering more selling.

"If overseas stocks slip again, the Nikkei may fall as low as 9,300," he added.

Market participants said risk factors for Tokyo stocks included volatile commodities markets, a possible correction ahead for U.S. stocks as the Federal Reserve ends its supportive policy, and the fear of a worsening euro-zone debt crisis.

Goldman Sachs lowered its 12 month target for TOPIX to 970 from 1,050 and said its Japan index targets imply 1%, 4% and 15% upside over 3, 6 and 12 months respectively, compared to 8%, 13 percent and 25% for Asian stocks outside Japan for the same periods.

The Nikkei has tumbled more than 8 percent since the March 11 disasters, while Asian stocks outside Japan have gained 5 percent over the last two months.

BANKS, UTILITIES EXTEND LOSSES

Banks fell further after comments from the government's top spokesman sparked concern on Friday that banks are likely to be asked to ease troubled Tepco's loan burden.

Although Japanese officials on Sunday denied the government will ask banks to forgive loans to Tepco, investors still seemed worried.

"The problem is that there seems to be a difference of opinions on this issue inside the government. The fact is that they don't seem to know what to do and that is

undermining investor confidence," said Masayuki Otani, chief market analyst at Securities Japan Inc.

"This uncertainty can keep a lid on bank stocks for a longer while," Otani said.

Mitsubishi UFJ Financial Group shed 1.6% to 377 yen and Sumitomo Mitsui Financial Group weakened 2.1% to 2,401 yen. SMFG also said on Friday it expects core lending to remain sluggish this year.

Utility stocks extended losses into a third day after the government approved on Friday a plan to help Tepco compensate victims of the crisis at its tsunami-crippled nuclear plant and said other utilities would be asked to pay annual premiums to

help fund compensation. Shares initially fell on Thursday in anticipation of the move.

Chubu Electric fell 4.5% to 1,417 yen and Tohoku Electric lost 5.4% to 1,060 yen.

But surprisingly strong machinery orders data boosted shares of construction companies and machinery makers on hopes that reconstruction demand will bolster capital spending.

Mitsubishi Heavy Industries gained 0.3% to 378 yen.

Core machinery orders rose 2.9% in March from the previous month, data showed on Monday, compared with the median estimate for a 9.6% decline and following a revised 1.9% decline in the previous month.

Declining shares outpaced advancing ones by 1,265 to 315.