Nikkei inches lower as eyes on yen and U.S. earnings

By Elaine Lies and Aiko Hayashi

TOKYO (BestGrowthStock) – Japan’s Nikkei average inched lower on Monday as the yen pared its losses and exporters gave up some gains, although the technical picture was brightening.

Market players said the government’s election battering had been largely priced in although worries about policy deadlock could keep further advances in check, with attention now shifting to overseas factors such as the imminent U.S. earnings season.

The ruling Democratic Party’s thrashing in an election on Sunday could thwart efforts to curb a huge public debt and get the economy in shape, and put Prime Minister Naoto Kan’s job at risk.

“The election results are neither negative nor positive, but what we wanted most was stability in politics — and that seems impossible for now,” said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.

The benchmark Nikkei spent most of the day in positive territory after a negative start due to profit-taking in some exporter shares, edging higher on rises on Wall Street and expectations for U.S. earnings.

“I think U.S. shares are likely on a rising trend, which Japanese shares will follow, but a lot of this is based on market hopes for earnings,” said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley Securities.

“If companies like Alcoa and Intel come in below expectations, this could set off selling.”

Alcoa (AA.N: ) reports on Monday and a raft of other firms, including Intel Corp (INTC.O: ), later this week.

But U.S. stock futures slipped in later trade, weighing on shares, while the dollar slipped back below 89 yen.

In thin trade, the Nikkei ultimately slipped 0.4 percent or 37.21 points to 9,548.11. The broader Topix (.TOPX: ) also shed 0.4 percent.

Receding pessimism about the global economy helped the Nikkei rise 4.1 percent last week despite hitting a seven-month low during that period.

The Nikkei’s next upward target is around 9,660, its 25-day moving average, which is a proxy for a one-month moving average that is closely watched in Japan. The next target lies around 10,250, roughly the level of its June high.

Technically, the picture for the Nikkei is brightening.

Its MACD, a measure of market momentum, is heading up after a bullish cross, while its slow stochastic — a measure of how oversold the market is and whether it is in a short-term up or down trend — has been climbing after a fall in June.

YEN PARES LOSSES

Though the dollar at one point rose above 89 yen, it gave up part of those gains by later trade — as did the euro, which edged down 0.1 percent to 111.84 yen. Investors welcome a weaker yen as it boosts exporter profits when repatriated. (FRX/: )

Sony Corp (6758.T: ) trimmed gains slightly as a result but still rose 3.6 percent to 2,532 yen. Honda Motor Co (7267.T: ) gained 3.1 percent to 2,687 yen.

But others fell, with Tokyo Electron (8035.T: ) down 1.7 percent at 4,830 yen and Canon Inc (7751.T: ) losing 0.9 percent to 3,450 yen.

Banks lost ground, with top lender Mitsubishi UFJ Financial Group (8306.T: ) falling 2.1 percent to 417 yen and No. 2 bank Mizuho Financial Group (8411.T: ) down 2.8 percent at 138 yen.

Gree (3632.T: ), an operator of game sites for mobile phones, fell 1.1 percent to 6,200 yen after Mitsubishi UFJ Morgan Stanley Securities cut its rating on the firm by two notches, to “3” from “1,” and lowered the target price to 6,750 yen from 7,200 yen.

Shares of steelmakers and shipping firms gained after data showed China’s trade surplus in June topped expectations on surprising strength in exports, suggesting the global economic recovery remains on track despite worries about a fresh slowdown.

Nippon Steel Corp (5401.T: ), the world’s second-biggest steelmaker, rose 2.3 percent to 308 yen and JFE Holdings Inc (5411.T: ) advanced 1.6 percent to 2,770 yen.

Shipper Kawasaki Kisen (9107.T: ) rose 1.1 percent to 368 yen.

Some 1.60 billion shares changed hands on the Tokyo exchange’s first section, its lowest volume in a week. Declining stocks outnumbered advancing ones, 984 to 524.

Nikkei inches lower as eyes on yen and U.S. earnings