Nikkei flat; euro worry offsets short-covering

By Aiko Hayashi

TOKYO (BestGrowthStock) – Japan’s Nikkei average was flat on Tuesday after sinking 4 percent in the past two sessions, with a stronger yen against the euro amid worries about the euro zone’s fiscal woes offsetting short-covering.

Mitsubishi (8058.T: ) and other trading houses slid after industrial metals prices plunged the day before.

The Nikkei earlier rose 1 percent but pared gains in afternoon trade.

“The market had a hard time finding reasons to keep buying as the euro was sold again in Tokyo trading,” said Kazuhiro Takahashi, general manager at Daiwa Securities Capital Markets.

“There’s a risk that the market could sharply fall — if the euro were to further tumble or commodity prices were to keep sliding, for example — but it’s more likely that it’ll consolidate around these levels for now, given the current situation.”

The benchmark Nikkei (.N225: ) added 6.88 points to 10,242.64, off a 10-week closing low hit the previous day.

The broader Topix (.TOPX: ) dipped 0.7 percent to 913.91.

The Nikkei’s relative strength index (RSI) stayed just below 40. Anything from 30 and below is considered oversold.

“Macro and micro situations are improving both in the United States and Japan, and stock prices that have moved in the opposite direction need to catch up with that eventually,” said Mitsuo Shimizu, deputy general manager at Cosmo Securities.

“But problems in the euro zone won’t be solved overnight, and the focus is on whether there’s a chance they will end up bringing down the global economy.”

The euro slid to a four-year low against the dollar the previous day as investors fretted that the steps some euro-zone nations are taking to cut their budgets will hinder economic growth.

The euro slipped below 114.00 yen before recovering some ground in Asian trade. It fell to the 112 yen level the previous day. A stronger yen curbs exporters’ profits when repatriated. (FRX/: )

Many Japanese exporters have set their euro/yen assumption rates around 120-125 yen, analysts said.

TRADING HOUSES DOWN

Mitsubishi Corp (8058.T: ) and other trading houses slipped after industrial metals prices plunged on Monday, with copper prices falling to their lowest since February. Signs that China’s economy (Read more about the fastest growing economy.) was slowing spooked investors already worried about Europe’s fiscal woes.

Shares of Mitsubishi Corp lost 1.6 percent to 2,031 yen and Mitsui & Co (8031.T: ) shed 0.9 percent to 1,306 yen. Itochu Corp (8001.T: ) shed 2.2 percent to 760 yen.

Shares of exporters rose after falling the previous day to help push down the market. Chip-tester maker Advantest Corp (6857.T: ) gained 0.2 percent to 2,197 yen and Kyocera Corp (6971.T: ) rose 0.7 percent to 8,500 yen.

DIC Corp (4631.T: ) tumbled 7.6 percent to 171 yen after the ink and synthetic resin maker said it plans to raise as much as 21.4 billion yen through a public share offering, leading to a share dilution of about 15.9 percent.

Trade was moderate, with 2.3 billion shares changing hands on the Tokyo exchange’s first section. Declining shares outnumbered advancing ones by nearly 3 to 1.

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(Editing by Edwina Gibbs)

Nikkei flat; euro worry offsets short-covering