Nikkei to rise after 6-month closing low, eyeing euro

TOKYO (BestGrowthStock) – Japan’s Nikkei average is set to rise on Wednesday after closing at a six-month low the day before, with a rebound in U.S. stocks (Read more about the stock market today. ) and a slightly stronger euro likely to boost banks and exporters such as Canon Inc.

Major U.S. indexes fell more than 3 percent on growing questions about the stability of the European banking system, before staging a late rebound that helped Wall Street end mostly flat, with the S&P 500 in positive territory after hitting a six-month low.

Tokyo market analysts said a strengthening in the euro, which on Tuesday fell to an 8- year low on the yen and neared a four-year trough against the dollar, along with the U.S. rebound, would help the Nikkei rise.

“We’re likely to see a lot of short-covering and bargain-hunting today, given how far the Nikkei fell yesterday,” said Toshiyuki Kanayama, a market analyst at Monex Inc.

“But there’s still a lot of longer-term uncertainty and if the euro turns volatile the way it was yesterday, things could change.”

In a sign the market is likely to start higher, Nikkei futures traded in Chicago closed at 9,555, up 1.2 percent from the Osaka close.

The euro had edged down 0.1 percent against the yen to 111.65 yen in early trade and lost 0.2 percent against the dollar to $1.2350.

Market players said the benchmark Nikkei was likely to trade between 9,400 and 9,600. On Tuesday it fell 3.1 percent to 9,459.89, its lowest finish since November 30. The Nikkei has lost more than 16 percent since hitting an 18-month high of 11,408.17 in early April.

But market players noted that technically, the market is now seriously oversold. The Nikkei’s relative strength index (RSI) fell to 24 on Tuesday, its lowest since late November. Anything from 30 and under is considered oversold.

Exporters and banks are likely to lead the Nikkei higher, market players said. But a weaker euro, or any new developments involving North Korea, could limit gains.

North Korea said on Tuesday it was cutting all ties with the South and threatened its neighbor with military action.

STOCKS TO WATCH

— Toshiba Corp

Toshiba said on Monday that it and U.S.-based Babcock & Wilcox will together invest $200 million in USEC Inc in return for a supply of enriched uranium for use in nuclear power generation.

— Kenedix Inc

Real estate asset manager Kenedix said on Tuesday that it plans to launch a 10 billion yen ($110 million) private fund to invest in Japanese office and commercial buildings, in the latest sign that the country’s property market is picking up.

Stock Market Analysis

(Reporting by Elaine Lies; Editing by Chris Gallagher)

Nikkei to rise after 6-month closing low, eyeing euro