<p>Japan's Nikkei share average snapped its longest weekly losing streak in 20 years by a whisker on Friday, but fell sharply on the day on disappointment at the lack of a clear signal on further US monetary stimulus and caution over China.
A sell-off triggered by investors taking profits following a settlement of June options accelerated as investors worried a surprise interest rate cut by China's central bank may signal unpleasant economic news ahead.
"The rate cut should have been a positive but it comes with suspicious timing," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley. "It makes people think that really bad news is going to be unleashed this weekend."
The Nikkei sagged 2.1% to 8,459.26, but managed to eke out its first weekly gain for nine weeks, narrowly avoiding its worst weekly string of losses since 1975.
US Federal Reserve chairman Ben Bernanke disappointed investors hoping for hints at a congressional hearing that he was ready to launch further monetary stimulus to jumpstart the US jobs market and ease the impact of the euro zone debt crisis.
"We came into this week with much anticipation about central banks having an opportunity to address the biggest elephant in the room - the euro crisis - but at the end of the week nothing's been done," said Stefan Worrall, director of equity cash sales at Credit Suisse.
The Bank of England stood pat on interest rates on Thursday, joining the European Central Bank, which shifted the onus of responsibility to resolve the euro zone debt crisis to euro zone leaders.
"Saying they are 'ready to act' if things worsen is almost an invitation for markets to sell off so the acting will come forth," Worrall said.
Aggressive selling as volumes hit a three-month high on both the Nikkei and the main board left all sectors in negative territory, with heaviest weighted loser Fast Retailing Co Ltd dragging the benchmark index down with a loss of 4.9%.
RISK SECTORS HIT
Riskier sectors that enjoyed gains on Thursday suffered the worst losses, with the insurance sector down 3 percent.
Consumer electronics companies took a tumble, with Sony Corp skidding 5.3% after a Morgan Stanley MUFG Securities downgrade, and Sharp Corp shedding 5.3% after it said it will list the subsidiary that operates its main liquid crystal display factory.
Renesas Electronics Corp swam against the tide, shooting up 18.8% as investors scrambled to cover short bets. The troubled chipmaker has abandoned a plan to ask major shareholders for a capital injection, but will seek a loan guarantee instead, giving investors some comfort that it can stay afloat.
The broader Topix index fell 1.8% to 717.74, but held clear of the sub-700 28-year low it hit on Monday.
The Nikkei fell back below its 14-day moving average of 8,543.30. The benchmark index is now down 17.5% from its one-year high on March 27 on concerns about a deepening euro zone debt crisis, slowing growth in China and a stuttering US recovery.
The market was affected by the settlement of June options and futures at Friday's open, known as a "special quotation", which settled at 8,613.40, a level that many investors had bet on the Nikkei to reach before their contracts settled.
"Investors are now unravelling their positions as they managed to limit their losses in the options SQ by desperately pushing prices up this week," said Mitsubishi UFJ Morgan Stanley's Fujito.