* Nikkei slips 0.9 pct on futures selling, yen strength
* Investors shun risk, turmoil sparks global economy worry
* Stronger yen weighs on shares of exporters
* Volume set to top 2 bln shares for 13th straight day
By Ayai Tomisawa and Antoni Slodkowski
TOKYO, Feb 23 (Reuters) - Japan's Nikkei average extended
losses on Wednesday as investors pull out of riskier assets, with
turmoil in Libya driving crude oil prices near 30-month highs and
sparking worries about slower global growth.
A stronger yen was also hitting sentiment, with exporters
dragged down as the dollar slipped to 82.55 yen, its lowest in
nearly two weeks.
While many market participants believe the Nikkei, which has
gained 4 percent since the start of the year, is due for a
correction, they are waiting for more trading cues to decide how
serious it could be.
"Investors are selling futures to hedge against potential
falls in Wall Street tonight as the Middle East turmoil
intensifies," said Hiroichi Nishi, general manager at Nikko
Cordial Securities. "The market is hit by a double whammy of
concern about the Middle East and the stronger yen."
The reaction of Wall Street to developments in the Middle
East and oil prices will be in focus, particularly now that the
three-month daily correlation between the Nikkei and the Standard
& Poor's 500 Index <.SPX> stands at 0.94. Major U.S. stock
indexes lost over 2 percent in heavy volume on Tuesday.
"Global investors are now trying to decide if the Middle East
crisis means a major shift of the geopolitical balance of power
in the region and the U.S. losing influence there, meaning more
instability and possible further oil price rises," said Masayuki
Kubota, a senior fund manager at Daiwa SB Investments.
"If surging oil prices stoke inflation to levels that can
seriously threaten the global economic recovery, the mood in
equity markets may turn very bleak, but it's still too early to
make this call," he said.
By mid-afternoon the Nikkei <> average was down 0.9
percent or 90.90 points at 10,573.80. It lost almost 2 percent on
Tuesday.
Analysts said the Nikkei's immediate resistance level is seen
at its 25-day moving average, now at 10,551.
The Nikkei has rallied 15 percent since November, and many
analysts predicted it could advance around 20 percent in 2011 as
hedge funds turn their attention to Japan on expectations of a
pickup in corporate activity such as M&A and share buy-backs.
[]
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Japan share valuations graphic: http://r.reuters.com/zyj28r
Flows into Japan funds: http://r.reuters.com/jyj28r
Japanese shares moves: http://r.reuters.com/hak28r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
The broader Topix <> lost 0.8 percent to 948.67.
By Tuesday, eastern Libya was no longer under the control of
Muammar Gaddafi after a revolt spread across the country,
soldiers who no longer backed the Libyan leader told a Reuters
correspondent. Gaddafi used tanks, helicopters and warplanes to
try to quell the growing revolt, witnesses said. []
HIGH VOLUME
In contrast to the recent rally on Wall Street, climbs in the
Nikkei have been on solid trading volumes, pointing to investors'
continued interest in Tokyo stocks and supporting hopes for more
gains in the medium term, market players said.
Mid-afternoon volume on Wednesday was again high with 1.9
billion shares changing hands on the Tokyo stock exchange's first
section, suggesting the day's total will be above last week's
daily average of 2.26 billion and mark a 13th straight day of
volume in excess of two billion shares.
Some blue-chip exporters were battered, with Sony Corp
<6758.T> shedding 2.0 percent to 2,975 yen and construction
machinery maker Komatsu Ltd <6301.T> also slipping 1.7 percent to
2,452 yen on the stronger yen.
Despite oil holding near 2-1/2-year peaks, energy and
commodities stocks fell as investors snapped up profits. Having
outperformed the rally in the Nikkei and gained some 20 percent
in the year to date, Inpex Corp <1605.T>, Japan's largest oil and
gas developer, shed 3.1 percent to 572,000 yen on profit-taking.
JGC Corp <1963.T>, a plant engineering firm, advanced 1.9
percent to 1,842 yen, snapping a six-session losing streak after
it said there had been no impact on its business from turmoil in
the Middle East.
"We have businesses in the Middle East and North Africa, but
we don't have projects in nations that are being rocked by
unrest. We've been telling analysts this for the past few days,"
a company spokesman told Reuters on Wednesday, adding that it
mainly does business with countries such as Saudi Arabia, the
United Arab Emirates and Qatar.
(Editing by Michael Watson)
