Nikkei edges up but yen weighs

By Aiko Hayashi and Chikafumi Hodo

TOKYO (BestGrowthStock) – Japan’s Nikkei average inched up 0.2 percent on Wednesday as an advance in U.S. stocks (Read more about the stock market today. ) and upbeat forecasts by Intel Corp brightened sentiment and prompted short-covering.

But investors were reluctant to chase the Nikkei aggressively higher as the yen lurked near a 15-year high versus the dollar hit earlier this week.

The market mood improved after the Nikkei lost more than 2 percent on Tuesday, with chip-related stocks advancing after shares of Intel, the world’s largest chipmaker, rose on strong fourth-quarter sales and margins.

The Nikkei also received support after Japanese core machinery orders unexpectedly jumped 10 percent in August.

“The market recovered some ground after Japanese stocks fared much worse than overseas markets yesterday due to the strong yen. It also received some positive impact from Intel’s earnings,” said Masaru Hamasaki, senior strategist at Toyota Asset Management.

“But after dollar/yen fell below 82 yen, a growing consensus in the market is that the yen will probably continue to advance little by little and that has sparked worries about the outlook for corporate earnings.”

The benchmark Nikkei ended up 14.87 points at 9,403.51. On Tuesday, it fell 2.1 percent in its biggest daily loss in a month.

The broader Topix dropped 0.2 percent to 822.65.

Intel’s forecasts raised hopes that the technology sector could end 2010 on a strong note, pushing up chip-related shares, though Hamasaki noted that the impact on the overall market was limited because it was not as if the company revised up their earnings outlooks.

Chip-gear maker Tokyo Electron Ltd gained 1.3 percent to 4,550 yen, while Nikon Corp rose 0.9 percent to 1,599 yen and Yokogawa Electric Corp climbed 2.6 percent to 599 yen.

Still, the Nikkei struggled to post strong gains due to the strength of the yen.

The dollar gained 0.2 percent to 81.86 yen, not far away from a 15-year low of 81.37 struck on Monday, though it was supported by nervousness that Japanese authorities could intervene the closer it gets to its record low of 79.75 yen.

Finance Minister Yoshihiko Noda said in parliament that he could not answer whether or not Japan would conduct intervention.

U.S. stocks (Read more about the stock market today. ) hit fresh 5-month highs on Tuesday as details from the Federal Reserve’s latest meeting showed the U.S. central bank may once again flood markets with cheap cash “before long” to further boost growth.

The currency market has become very short dollars on QE expectations.

On the technical front, the Nikkei was expected to be supported by positive signals.

The Nikkei faces strong support at the 38.2 percent retracement of its September-October rally and its 55-day moving average, both of which come in around 9,365.

Elliott Wave analysis shows the Nikkei could rally to 10,000 as long as it holds above 9,311.

EARNINGS IN FOCUS

With Japan’s earnings season getting into full swing later this month, earnings stories have started to drive stock prices.

Shares of Best Denki Co surged 11 percent to 222 yen after the operator of consumer electronics stores lifted its full-year operating profit forecast by 30 percent as Japan’s hottest summer in a century helped sales of air conditioners.

But Tokyo Steel Manufacturing Co shed 5.4 percent to 921 yen after Japan’s biggest construction steel maker revised its six-month parent operating forecast down to a 1.5 billion yen loss from a 1.7 billion yen profit.

Tokyo Steel had to raise prices on all products in September to pass on higher steel scrap costs.

Fast Retailing extended falls made since the operator of the Uniqlo discount clothing chain forecast its first profit fall in four years, shaking investor confidence in one of the few Japanese retailers thought to have strong growth prospects.

The stock fell 2.4 percent to 10,910 yen, after losing 9.8 percent on Tuesday.

Some 1.89 billion shares changed hands on the Tokyo exchange’s first section, down from a five-month high of 2.88 billion booked last Wednesday.

Declining stocks outnumbered advancers, 892 to 604.

(Additional reporting by Reuters FX analyst Krishna Kumar in Sydney; Editing by Joseph Radford)

Nikkei edges up but yen weighs