Nikkei slips from 6-wk high, hurt by euro zone doubts

Tokyo: Japan's Nikkei share average fell more than 1 per cent on Tuesday from a six-week high hit the previous day on concerns that Europe's solution to its debt crisis may not be as fast and comprehensive as some had hoped for.

Shares in Olympus , tumbled for a third day and have lost 41 per cent since its shock dismissal of its CEO, with the camera and endoscope maker under pressure to disclose details of payments to advisers in the buyout of a UK-based medical equipment firm.

Germany said on Monday that a summit of EU leaders next Sunday would not produce a miracle cure for the euro zone's sovereign debt crisis, a warning that poured cold water on hopes of a clear-cut solution to the debt's crisis.

"I'd say more than half of equity rally this month had been driven by hopes of European policy steps. I thought the rally would run out of steam after the EU summit but it came faster," said Soichiro Monji, chief strategist at Daiwa SB Investments.

The Nikkei average fell 1.4 per cent to 8,755.46, while the broader Topix index lost 1.2 per cent to 752.95.

For now, support for the Nikkei is seen around 8,689, a 38.2 per cent retracement of its rally to Monday's six-week closing high from its October 5 low, and then at its 25-day moving average, now around 8,650.

Shares of exporters, which had benefited from optimism on the euro zone's debt crisis, underperformed the overall market.

Machinery manufacturers fell 2.4 per cent while makers of electronics goods fell 2.2 per cent and auto stocks dropped 1.7 per cent.

Some of those manufacturers, such as Honda and Sony , have also been hit by concerns over flood damage at their factories in Thailand.

Olympus continued to fall in heavy trade, briefly hitting a new 2-1/2-year low of 1,455 yen as the company's feud with ousted Chief Executive Michael Woodford grows nastier.

The company told investors on Monday that it may take legal action against Woodford, accusing him of disclosing confidential information in media interviews.

Woodford in turn has accused the board of firing him for probing allegations of improper payments related to acquisitions, according to media reports.

Investors are also focused on US corporate earnings, with the scorecard so far mixed at best.

This week will see reports from Goldman Sachs , Bank of America , Apple Inc and other prominent companies.

"Looking at US corporate earning so far, I'm left with the impression that even though EPS is coming in line with expectations, the top line is weak at many companies. I expect global shares to slip towards the end of month," Monji said.