Nikkei seen rangebound, reconstruction plays eyed

TOKYO (Reuters) – Japan’s Nikkei benchmark is expected to start lower on Monday after higher oil prices hit U.S. stocks on Friday, but buying in reconstruction-related stocks may lend support, keeping trade confined to a narrow range.

The benchmark finished above its closely watched 25-day moving average on Friday, around 9,716, for the first time since March 4, but technical charts still indicate a downward trend, analysts said.

“When the Nikkei nears 9,800, profit-taking could hit. It’s too early to chase the market higher,” said Hiroichi Nishi, general manager at SMBC Nikko Securities.

U.S. shares fell last week as a spike in oil prices revived worries that inflation could derail a U.S. economic recovery.

Oil prices surged the most in three weeks on Friday, with Brent jumping $4 a barrel to a 32-month high as a sinking dollar triggered a fresh rush of fund buying across the commodities spectrum.

“Oil-related shares may outperform the market,” said Fumiyuki Nakanishi, a strategist at SMBC Friend Securities, adding that reconstruction-related stocks such as construction machinery maker Komatsu Ltd (6301.T: Quote, Profile, Research) may also be bought.

Nikkei futures in Chicago pointed to a weaker start in Tokyo. They were 9,720, down from the Osaka close of 9770.

The benchmark Nikkei (.N225: Quote, Profile, Research) closed up 1.9 percent or 177.15 points at 9,768.08 on Friday, its highest close since March 11 and the biggest percentage gain for a single day since March 30.

Analysts say that the index will likely move between 9,650-9,800 on Monday. The next key resistance level is seen at its 200-day moving average at 9,834.

The broader Topix (.TOPX: Quote, Profile, Research) ended up 1.4 percent or 12.03 points at 853.13.

STOCKS TO WATCH

– Sharp Corp (6753.T: Quote, Profile, Research)

Sharp has suspended work at two domestic LCD panel factories, citing an inability to secure a stable supply of industrial gas in the aftermath of the March 11 earthquake in Japan, the Nikkei business daily reported.

– JFE Holdings Inc (5411.T: Quote, Profile, Research)

JFE Steel Corp., a unit of JFE Holdings, is finalising plans to suspend one of the four blast furnaces at its Fukuyama site in Hiroshima Prefecture and switch output to an upgraded furnace due to come back online next month, the Nikkei business daily said.

– NTT DoCoMo Inc (9437.T: Quote, Profile, Research)

NTT DoCoMo will release late this month a mobile phone that can have its SIM lock removed, allowing the handset to be used with other carriers’ networks, the Nikkei business daily said.

– IHI Corp (7013.T: Quote, Profile, Research)

IHI is seeking to commercialize as early as fiscal 2015 a marine wind power station that costs half as much to install as existing models, the Nikkei business daily said.

(Reporting by Ayai Tomisawa; Editing by Edwina Gibbs)

Nikkei seen rangebound, reconstruction plays eyed