Nikkei set to slip on Spain downgrade; eyes on yen

TOKYO (BestGrowthStock) – Japan’s Nikkei average is likely to slip on Monday after a downgrade of Spain’s credit rating reinforced worries about euro zone debt issues, spooking global investors, but selling may slow if the yen’s advance is checked.

Japan’s tiny Social Democratic Party decided on Sunday to leave the ruling coalition ahead of an election but this was not expected to have any impact on the Nikkei, market players said.

Fitch cut Spain’s credit rating by one notch on Friday, saying the country’s economic recovery will be more muted than the government forecast due to its austerity measures.

Analysts said the extent of declines in the Nikkei would depend on the yen’s moves against the euro and the performance of stock markets elsewhere in Asia, and that bargain-hunting may easily emerge.

“The Fitch ratings cut on Spain shows that the European issues have not yet been cleared up at all, and this prompted selling of overseas stocks,” said Hiroichi Nishi, general manager at the equity division of Nikko Cordial Securities.

“Yet while there’s a trend toward a stronger yen, it isn’t pronounced, and it’s possible that Wall Street’s falls may have been exaggerated by investor desire to take profits ahead of a three-day weekend. All of this may limit falls.”

The euro edged up 0.1 percent against the yen to 111.79 yen

while the dollar was flat against the yen at 91.03 yen.

The benchmark Nikkei (.N225: ) is likely to move between 9,550 and 9,800, market players said. It closed at 9,762.98 on Monday and has lost roughly 12 percent so far this month, putting it on track for its worst monthly performance in well over a year.

In a sign the Nikkei may open lower, Nikkei futures traded in Chicago closed at 9,650, down 1.5 percent from the Osaka close.

But technical indicators are starting to point tentatively toward a possible rebound, with the Nikkei’s relative strength index (RSI) climbing above 30 late last week. Anything under 30 is considered oversold.

The Nikkei’s MACD has also stopped falling and appears to be inching upwards.

Stock Market Today

(Reporting by Elaine Lies; Editing by Edwina Gibbs)

Nikkei set to slip on Spain downgrade; eyes on yen