Nikkei seen higher; eyes on currencies, earnings

TOKYO (BestGrowthStock) – Japan’s Nikkei average is likely is rise on Monday, boosted by solid U.S. corporate earnings and a rise in the euro after fewer-than-expected European banks failed stress tests.

Sony Corp (6758.T: ) and Toyota Motor Corp (7203.T: ) and banking stocks are set to be in focus following media reports over their earnings as Japan’s results season moves into higher gear.

The Nikkei business daily said Sony will likely return to profitability in the April-June quarter, beating market expectations for an operating loss, while Toyota is also expected to have posted a sharp recovery from the previous year’s loss.

Sony is scheduled to announce its first-quarter earnings after the market close on July 29.

European bank stress tests showed seven of 91 banks failed the tests, including ones in Greece and Spain, for an overall capital shortfall of $3.5 billion euros.

In initial market reaction in New York late on Friday, the cost of insuring the debt of large European banks fell further and the euro rose against the dollar.

“With the results of the stress tests, which had been the market’s big focus, out in the open, downward factors seem to have run their course for now, even though there’s criticism that those tests might have been too easy,” said Hiroichi Nishi, general manager of equity marketing at Nikko Cordial Securities.

“The market will likely rise initially and then move narrowly awaiting reaction in European with market players keeping an eye on currency moves.”

Nikkei futures traded in Chicago closed at 9,520, up 0.8 percent from the Osaka close.

The benchmark Nikkei (.N225: ) is likely to move between 9,400 and 9,600, market players said. It rose 2.3 percent on Friday to 9,430.96, snapping a five-day losing streak, but was up only 0.2 percent on the week.

U.S. stocks (Read more about the stock market today. ) rose about 1 percent on Friday as GE (GE.N: ) shares jumped after the U.S. conglomerate increased its quarterly dividend by 20 percent, spurring heavy institutional buying. (.N: )

In Japan, charts have grown brighter as the Nikkei pulled away from oversold territory, with its slow stochastic — a measure of how oversold the market is and whether it is in a short-term up or down trend — rising after a bullish cross.

Resistance is seen at the level of the Nikkei’s 25-day moving average around 9,600. The 25-day moving average is a proxy for a one-month moving average and is closely watched in Japan.

Eyes are turning to corporate earnings, with Japan’s reporting season entering a full swing this week.

GE, profits boost Wall St, S&P crosses key level.

Euro recovers vs dollar, stress test worries linger.

Bonds slip as equities rise renews risk appetite.

Gold falls but holds ground after stress.

Oil slips, but gains on week as storm nears.

STOCKS TO WATCH

— Toyota Motor Corp

Toyota is likely to have secured a group operating profit of about 100 billion yen ($1.1 billion) in April-June, thanks to solid sales and a sharp recovery from the previous year’s loss, the Nikkei business daily said on Sunday.

— Banking shares

Mizuho Financial Group Inc (8411.T: ), Sumitomo Mitsui Financial Group (8316.T: ) and Mitsubishi UFJ Financial Group Inc (8306.T: ) are likely to have each achieved net profits of over 100 billion yen for the April-June period, the Nikkei business daily said on Sunday.

— Nippon Steel Corp (5401.T: ), JFE Holdings Inc

Nippon Steel and JFE Holdings are expected to earn consolidated pretax profit of about 100 billion yen each for the April-September half, the Nikkei business daily reported.

— Daiichi Sankyo

Daiichi Sankyo aims to begin producing vaccines as early as next spring in a joint venture with an organization affiliated with Kitasato University, the Nikkei business daily said.

Japan is home to several vaccine producers, but they are all small entities, the Nikkei said, adding this new arrangement should provide Japan with a more stable supply of vaccines and boost competition with foreign suppliers.

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(Reporting by Aiko Hayashi; Editing by Edwina Gibbs)

Nikkei seen higher; eyes on currencies, earnings