Nikkei in biggest one-day drop in 2 months as downing of Malaysia jet hits mood
* Geopolitical concern could have mid-term impact - fund manager * Oil companies outperform on rising oil prices By Ayai Tomisawa TOKYO, July 18 (Reuters) - Japan's Nikkei share average dropped to a one-week low on Friday morning and posted its biggest one-day fall in two months as investors turned risk averse on news that a Malaysian Airlines passenger jet was shot down near the Ukraine-Russia border. The Nikkei fell 1.7 percent to 15,110.45 in mid-morning trade, the lowest since July 11 and was the biggest one-day percentage drop since May 7. The index has breached 15,130.25, the 23.6 percent Fibonacci retracement on the rise from May 21 to July 4. A Malaysian jet was brought down over eastern Ukraine on Thursday, killing all 298 people aboard and sharply raising the stakes in a conflict between Kiev and pro-Moscow rebels in which Russia and the West back opposing sides. A Ukrainian official said it was caused by a missile fired at the plane. Both sides denied involvement in the crash, which came just a day after the U.S. ratcheted up sanctions against Moscow. Many market players said that the news shocked the market immediately and made investors jittery, but in the mid-to-long term, investors' eyes will turn to the U.S. economic recovery and Japanese corporate earnings for the April-June quarter. "Investors were taking risks and chasing the market higher until the news soured sentiment, so it could also mean that it has become a good reason to take quick profits," said Toru Ibayashi, executive director at UBS Wealth Management. He added that it is difficult to say how much impact the incident will have on companies' earnings. In contrast, others voiced concerns, saying that the geopolitical complexity in Russia and Ukraine could affect the market in the mid-term depending on developments in the region. "Amid a recovery in the Japanese market led by the strong U.S. economy amid expectations for rising U.S. interest rates, this geopolitical concern can cloud such optimism in the mid-term," said Hiromitsu Kamata, head of Japanese equity target department at Amundi Japan. Kamata said that the plane crash can be perceived as an isolated event in the financial market, but it also has the potential to lead to a bigger turmoil, and the market should not underestimate the impact. Exporters sank after the dollar slid nearly 0.5 percent against the yen overnight to post its biggest one-day loss since early April. It last traded at 101.205 yen. A break below 101.06 yen would take the dollar to a two-month low. Toyota Motor Corp dropped 1.1 percent, Honda Motor Co shed 1.7 percent and Panasonic Corp declined 1.7 percent. Oil shares outperformed the market after oil prices began rising as new U.S. sanctions announced on Wednesday took aim at some of Russia's biggest companies for the first time. Inpex Corp rose 1.2 percent, while Japan Petroleum Exploration was flat. The broader Topix dropped 1.1 percent to 1,259.51, and the JPX-Nikkei Index 400 shed 1.1 percent to 11,470.87. (Editing by Jacqueline Wong)
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