Nikkei climbs, boosted by chips and exporters

By Elaine Lies

TOKYO (BestGrowthStock) – Japan’s Nikkei climbed 1.6 percent on Monday, advancing toward a key resistance level as short-covering emerged on a sense the market had been oversold, with investors also taking heart from gains in the euro.

Chip-linked shares such as Advantest Corp (6857.T: ) rose after U.S. peers gained on good results by a major chipmaker that suggested improving demand, with strong U.S. consumer sentiment data reassuring investors about the health of the economy following an unexpected drop in retail sales.

“We’re seeing pretty active short-covering on a sense that recent risk avoidance moves were exaggerated, leaving markets oversold,” said Takashi Ushio, head of the investment strategy division at Marusan Securities.

“But the euro’s apparent short-term recovery is also a plus, with market sentiment appearing a bit more positive regarding a solution to the euro zone’s debt woes given the EU leaders’ meeting later this week.”

In a summit on Thursday, European Union leaders will make a new attempt to convince financial markets they can contain a debt crisis by agreeing how to tighten policy coordination and strengthen budget discipline.

The euro rose as far as $1.2208 on electronic trading platform EBS in early trade, before trading around $1.2172. It rose 0.5 percent to 111.79 yen.

The benchmark Nikkei (.N225: ) climbed 151.51 points to 9,856.76 by midmorning, while the broader Topix (.TOPX: ) gained 1.1 percent to 875.93.

A resistance band for the Nikkei stands around 9,900, roughly the level of its 25-day moving average. Market players said a break above this would open the way for it to test key psychological resistance at 10,000, as well as filling in the last remnant of a gap opened in May when the Nikkei fell suddenly.

The Nikkei was last above its 25-day moving average in late April.

But most noted that while sentiment toward the euro zone may have brightened, nothing much has changed as yet.

“The Nikkei may well test resistance, but whether it actually breaks through it or not is problematical given the uncertainties that still linger,” said Hiroichi Nishi, general manager at the equity division of Nikko Cordial Securities.

“Some foreign investors, such as hedge funds, appear to be taking a positive view of the new government of (Prime Minister Naoto) Kan, and whether this will continue or not is another big question.”

Kan, who took over the nation’s top job after his unpopular predecessor quit abruptly nearly two weeks ago, has made tackling a public debt that is already twice the size of Japan’s GDP a top priority.

Other market players said that with Chinese markets closed for a holiday, the Nikkei might lack enough cues to push it decisively higher until after investors see how European and New York shares move later on Monday.

Sony Corp (6758.T: ) jumped 2.3 percent to 2,630 yen, while Canon Inc (7751.T: ) rose 1.1 percent to 3,755 yen and TDK Corp (6762.T: ) added 1.9 percent to 5,310 yen.

Shares of Ushio Inc (6925.T: ) jumped 3.9 percent to 1,454 yen after the Nikkei business daily said it developed a powerful extreme ultraviolet light source that it aimed to sell to ASML (ASML.AS: ) for use in its next-generation chip production equipment.

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Nikkei climbs, boosted by chips and exporters