Nikkei lower after resistance try fails

By Elaine Lies and Aiko Hayashi

TOKYO (BestGrowthStock) – Japan’s Nikkei average edged down 0.1 percent on Tuesday after failing to break above a key resistance level, with support from robust earnings at home countered by persistent worries about a strong yen.

A surprising 23.6 percent jump in U.S. new home sales in June from May countered some disappointing data in recent weeks that had increased concerns the economy could slip back into recession, boosting U.S. stocks (Read more about the stock market today. ) more than 1 percent.

The benchmark Nikkei spent much of the day in positive territory but slipped shortly before the close, with market players acknowledging that while there were signs of improvement it was still too early to say the tide had turned.

“The housing data isn’t necessarily as good as it seemed. In some ways it was just a correction of the sharp falls the month before,” said Hiroaki Osakabe, a fund manager at Chibagin Asset Management.

“There’s a bit of reassurance, yes, but we still can’t yet definitely say that things are really improving.”

The benchmark Nikkei shed 6.81 points to 9,496.85 after failing to break decisively above resistance at 9,520, the level of its 25-day moving average. The broader Topix was flat at 846.12.

Trading volume was moderate, with market players saying many investors wanted to wait and see earnings before trading, except in the case of companies whose results were likely to send their share prices sharply higher.

Japanese earnings reports pick up steam this week, and after the bell exporter heavyweight Canon Inc posted a 153 percent rise in quarterly profit, bigger than expected, on robust sales of its high-end cameras.

Market players had been hoping the Nikkei would break above its 25-day moving average, a move that would have cleared the way for further gains. Its next target likely stands at 9,800, near a recent peak hit on July 14.

But charts show a lack of clear direction for the benchmark.

Its slow stochastic — a measure of how oversold the market is and whether it is in a short-term up or down trend — continues to head higher but is approaching overbought territory, though its relative strength index (RSI) is neutral at 48.

But its MACD, an indicator of market momentum, headed higher after a bullish cross.

“Even though investors are welcoming solid earnings at this moment, the economic outlook for the latter part of this year and after remains uncertain,” said Kazuhiro Takahashi, general manager at Daiwa Securities Capital Markets.

Masayoshi Okamoto, head of dealing at Jujiya Securities, said foreign investors appeared to have stopped selling Japanese shares but that buying had yet to really revive.

“Only some European investors seem to be buying after dumping Japanese shares from their portfolios earlier this summer,” he said.

EARNINGS IMPACT

Activity was by and large earnings driven.

Kao Corp rose 1.1 percent to 2,111 yen after the home products maker posted earnings for the April-June quarter showing operating profit up 34.6 percent from the same quarter last year, citing sales growth in Asia for its consumer products and chemicals divisions.

Seiko Epson jumped 4.4 percent to 1,156 yen after the Nikkei business daily said it will likely post an operating profit of 2 billion yen ($23 million) for the April-June quarter compared to a loss of 12.4 billion for the same quarter last year, going into the black for the first time in two years.

But shares of exporters that had led market gains the previous day lost steam. Canon fell 0.4 percent to 3,515 yen and Kyocera Corp declined 0.7 percent to 7,410 yen. Toyota Motor Corp shed 1.6 percent to 3,040 yen.

Shares of JFE Holdings Inc, the world’s fifth-biggest steelmaker, slid 3.1 percent to 2,656 yen after it posted a quarterly profit but its forecast missed market expectations.

The stock eked out gains earlier after it said it plans to buy a stake of 14.99 percent in India’s JSW Steel Ltd for about 90 billion yen ($1.04 billion).

Trade was moderate, with 1.7 billion shares changing hands on the Tokyo exchange’s first section. Advancing shares outnumbered declining ones 862 to 643.

Stock Market Analysis

(Editing by Michael Watson)

Nikkei lower after resistance try fails