Nikkei climbs after touching 6-month low

By Elaine Lies

TOKYO (BestGrowthStock) – Japan’s Nikkei average came off a six-month low to jump 1.2 percent on Thursday in its best one-day performance in two weeks, with a weakening of the yen against the euro helping counter persistent worry about Europe’s debt crisis.

Stocks fell earlier in the day after the Financial Times said China is reviewing its euro-zone bond holdings on growing concern about gaping deficits in euro-zone member countries — stoking investor worries that European woes could reverse the global economic recovery.

A rise in U.S. stock futures and gains in other Asian share markets provided an additional boost, but market players said further gains would likely be hard-won as an overall bias toward taking on more risky assets remains.

“We’re seeing short-covering of a lot of shares, large cap shares, that were sold on euro zone worries, with buying in futures and a weaker yen providing an additional boost,” said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley Securities.

“Given that the Nikkei was oversold, there may be a bit of a rebound getting going here. But there’s still a lot of concern about Europe, especially Spain, with the impact of any troubles there likely to be much larger than those of Greece.”

The benchmark Nikkei (.N225: ) rose 117.06 points to 9,639.72 after earlier falling as low as 9,395.29, its lowest since early December. The broader Topix (.TOPX: ) rose 1.3 percent to 869.89.

The Nikkei’s relative strength index (RSI) rose to 30 for the first time in a week. Anything below 30 is considered oversold.

S&P futures climbed 1.7 percent, with some market players saying they thought U.S. shares were due for a technical rebound.

Others said bargain-hunting was emerging as the end of the month approaches and investors try to repair portfolios battered by a tumultuous May. As of Thursday, the Nikkei had lost 12.8 percent this month.

Overseas investors sold 434.7 billion yen ($4.8 billion) of Japanese stocks last week, the biggest net stock selling since March 15-21, 2009, Ministry of Finance data showed.

They have been net sellers since the start of the month, shedding about 845 billion yen, as Europe’s debt problems have deepened.

“The market is paying now after it underestimated the seriousness of the problems in southern Europe for a while. The news about China’s move is one example underlining the gravity of the problems,” said Fumiyuki Nakanishi, manager at SMBC Friend Securities.

“Foreign investors are cutting back on riskier assets in their portfolios. Upbeat corporate earnings prospects don’t figure in the equation much at this point.”

EURO GAINS

The euro rebounded sharply after nearing last week’s four-year low earlier in the day, with its rise gaining steam as Asian shares climbed, giving a broad lift to yen crosses.

The euro extended its gains and touched an intraday high after a government official told Reuters that China remains committed to its long-standing goal of diversifying it foreign exchange reserves.

It gained 1.1 percent against the dollar to $1.282 and 1.5 percent against the yen to around 110.87 yen.

Many Japanese exporters have set their currency assumption rates for euro/yen at 120-125 yen for the year to March. A stronger yen erodes exporters’ profits when repatriated.

Sony Corp (6758.T: ) rose 2.1 percent to 2,788 yen, Canon Inc (7751.T: ) climbed 2.1 percent to 3,680 yen and Honda Motor Co (7267.T: ) gained 1.2 percent to 2,775 yen. All started the day in negative territory.

Shares of Osaki Electric (6644.T: ), a maker of meters for electric power companies, surged 7.4 percent to 744 yen after saying it will join hands with Hitachi Ltd (6501.T: ), Japan’s largest electronics conglomerate, in smart grid technology for the global market.

Smart grid-related stocks have been popular in recent months. The technology aims to make more efficient use of energy from household goods to electric cars.

Nichi-iko Pharmaceutical Co (4541.OS: ) jumped 4.6 percent to 3,015 yen after the Nikkei business daily reported French drugmaker Sanofi-Aventis (SASY.PA: ) will buy a small stake in the firm to enter Japan’s generic drug market.

Trade was moderate on the Tokyo exchange’s first section, with 2.4 billion shares changing hands. Advancing stocks outnumbered declining one, 953 to 607.

Stock Market News

(Additional reporting by Aiko Hayashi; Editing by Chris Gallagher)

Nikkei climbs after touching 6-month low