Nikkei hits 3-month high as 9,800 resistance eyed

TOKYO (BestGrowthStock) – Japan’s Nikkei average rose more than 1 percent to a three-month high on Monday, adding to gains made last week as risk money shifts toward global equities on improving prospects for the U.S. economy.

The outlook for the U.S. economy has brightened after the Federal Reserve decided to buy more debt and after encouraging U.S. jobs data, helping push the Nikkei (.N225: ), an index which has lagged other stock markets, through 9,700.

But investors were careful about chasing the benchmark too aggressively as they expect profit-taking and technical selling after a jump of more than 6 percent since the start of last week, its best weekly performance in a year.

“We are seeing some resistance, but sentiment toward the Nikkei is strong. After the current level of 9,700-9,800 is broken, the market will test the Nikkei toward 10,000,” said Hideyuki Ishiguro, a supervisor in the investment strategy section at Okasan Securities.

Upward momentum picked up after the Nikkei broke through a high of 9,716.92 reached on October 7, lifting it to an intraday high of 9,737.01.

At the midday break, it was 1 percent or 96.67 points higher at 9,722.66.

The broader Topix (.TOPX: ) gained 0.8 percent to 841.34.

The Nikkei’s technical trend brightened after it broke through its 25-day moving average of 9,430 as well as its 26-week moving average of around 9,530 last week, which some analysts now see as support.

Its next target would be an intraday high of around 9,750 reached in early August and further resistance is seen at its July peak of around 9,800.

Market players have said last week’s rally was largely due to short-covering of futures by foreign investors and advances for resource shares as hopes for more liquidity spurred investor risk appetite.

But Tokyo is still lags other stock markets, particularly due to worries about the impact of the strong yen on corporate earnings and a fragile economic recovery.

Market players also cite ineffective measures against deflation, a lack of political leadership and lackluster growth prospects as being behind the Japanese market’s underperformance.

In contrast to the Nikkei’s three-month high, U.S. stocks (Read more about the stock market today. ) have surged back to levels last seen before Lehman Brothers’ collapse in 2008.

“We are watching whether there are more strong economic indicators from the United States. More strong signs would push up the dollar and encourage inflows into Japanese export-related shares,” Ishiguro said.

A weaker yen has also helped the market. In early Monday Asian trade, the yen was little changed from Friday at 81.30 against the dollar but it was more than a yen lower than the 15-year high of 80.21 yen reached last week.

RESOURCE STOCKS UP

Resource-linked stocks rose on higher commodity prices as investors took a surprisingly robust U.S. jobs report as a hint that the economy was in better shape than previously thought.

U.S. non-farm payrolls figures released on Friday showed a solid rise of 151,000 for October, the first gain since May and more than double economists’ expectations.

Gold hit a record peak on Friday and industrial metals and oil pushed higher.

Sumitomo Metal Mining Co (5713.T: ) climbed 1.7 percent to 1,403 yen and Mitsui Mining and Smelting (5706.T: ) gained 2.3 percent to 262 yen. Trading firm Mitsui & Co (8031.T: ) rose 3 percent to 1,359 yen.

Shares of Credit Saison (8253.T: ) shot up 6.5 percent to 1,249 yen after the consumer credit firm raised its full-year net profit forecast to March to 12 billion yen ($147.7 million) from 9 billion yen, partly due to cost cuts.

Exporter shares climbed, with Honda Motor Co (7267.T: ) up 2.9 percent at 2,965 yen and Tokyo Electron (8035.T: ) gaining 2.6 percent to 5,050 yen.

Toyota Motor Corp (7203.T: ) rose 0.4 percent to 2,977 yen, lagging a strong rise in other auto stocks, after its higher annual profit forecast revision fell far short of consensus projections.

Toyota’s new annual forecast suggesting an operating profit of just 57 billion yen in the second half, suggesting a much bigger hit from the yen’s strength and lackluster sales than rivals Honda and Nissan Motor Co (7201.T: ).

(Reporting by Aiko Hayashi and Chikafumi Hodo; Editing by Edwina Gibbs)

Nikkei hits 3-month high as 9,800 resistance eyed