Nikkei may see slight rise after sharp weekly drop

TOKYO (BestGrowthStock) – Japan’s Nikkei average is set to rise on Monday after suffering its worst weekly drop in more than a year, buoyed by gains in U.S. stocks (Read more about the stock market today. ), with blue-chip shares expected to gain.

U.S. stocks (Read more about the stock market today. ) snapped a three-day losing streak on Friday but the S&P 500 was down 10.6 percent from its April 23 high as investors have fled risky assets on deepening worries about disunity in the euro zone over its debt crisis.

Moves are likely to be dictated by activity in the currency market after the euro gained broadly on Friday, although in early Asia trade on Monday, it edged lower against the yen. The dollar was flat against the yen at just over 90 yen.

Tokyo analysts said the Nikkei, which is by some technical indicators now oversold, was likely to rise a bit but that longer-term uncertainty would limit gains.

“There may be a slight easing of risk avoidance after U.S. shares rose, setting the Nikkei up for a bit of a rebound,” said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley Securities.

The Nikkei fell 6.5 percent last week.

“But the euro zone problems haven’t been cleaned up yet and even though the global economy is definitely showing more signs of recovery than it did six months ago, worry continues that the euro zone’s woes will put a brake on this growth.”

Bank shares led U.S. stocks (Read more about the stock market today. ) higher a day after the U.S. Senate approved a sweeping overhaul of regulation of Wall Street firms, capping months of wrangling, with analysts saying the bill appeared less onerous than many had expected and its approval alone reduced market uncertainty.

The Dow (.DJI: ) gained 1.3 percent, the Standard & Poor’s 500 (.SPX: ) gained 1.5 percent and the Nasdaq (.IXIC: ) rose 1.1 percent.

In a sign that Japanese shares may open higher, Nikkei futures traded in Chicago closed at 9,840, up 1.1 percent from the Osaka close.

The benchmark Nikkei’s (.N225: ) relative strength index (RSI) stood at 28 on Friday, its lowest since November 2009. Anything below 30 is considered oversold.

The Nikkei is likely to move between 9,700 and 9,900, market players said. It closed at 9,784.54 on Friday, its lowest close in more than five months, at one point falling as low as 9,696.63.

Wall St lifted by banks after dismal week (.N: ) > Euro heads for first weekly gain in six vs dollar.

Prices end slightly lower after volatile day.

Gold ends lower as safe-haven bid.

Oil falls on high U.S. crude stockpiles.

STOCKS TO WATCH

— Elpida Memory Inc

Elpida expects group operating profit to top 150 billion yen ($1.7 billion) for the year ending in March 2011 if DRAM chip prices and currency rates stay stable, the Nikkei business daily reported on Saturday.

— Toshiba Corp

Toshiba will sell LED lighting in China and Russia, aiming to boost sales from its LED lighting business to 350 billion yen by the 2015 business year, the Nikkei business daily said.

Stock Market Today

(Reporting by Elaine Lies; Editing by Edwina Gibbs)

Nikkei may see slight rise after sharp weekly drop