Nikkei to trade in narrow range, defensives strong

TOKYO (BestGrowthStock) – Japan’s Nikkei average is expected to move narrowly on Thursday, with exporters vulnerable to selling after the yen strengthened on concern about the U.S. economy, though bargain hunting could curb losses.

Wall Street fell broadly on Wednesday after a top Federal Reserve official said interest rates should not stay low for much longer, giving investors an excuse to take profits. (.N: )

The dollar fell further toward 93 yen after Federal Reserve Chairman Ben Bernanke said the U.S. economy still faces significant headwinds. It was flat at 93.33 yen after hitting a seven-month high earlier this week.

Noting recent signs of overbuying in the benchmark Nikkei (.N225: ), market players said shares could remain vulnerable to profit-taking.

“But we’ve seen increasing volumes in recent days and investors will be looking for bargains, so any falls are likely to be limited,” said Hiroichi Nishi, general manager at the equity division of Nikko Cordial Securities.

Volume rose sharply on Wednesday, with nearly 2.4 billion shares changing hands on the Tokyo exchange’s first section, the highest in about a month.

The Nikkei’s relative strength index (RSI) has fallen slightly from a peak of 76 hit earlier this week but still held above 70, which is considered overbought territory. But the Nikkei’s trend looks bullish on daily Ichimoku charts.

Defensive shares such as railways and drugmakers are likely to be strong, while banks — which surged on Wednesday after lagging the market in its recent rally — could extend gains, some analysts said.

The benchmark Nikkei is likely to trade between 11,150 and 11,350, market players said. It closed at 11,292.83 on Wednesday.

Nikkei futures traded in Chicago closed at 11,290, unchanged from the Osaka close.

STOCKS TO WATCH

— Nissan Motor Co (7201.T: )

Carmakers Renault (RENA.PA: ), Nissan and Daimler (DAIGn.DE: ) will swap stakes and jointly develop cars in a tie-up that could lead to combined savings of 4 billion euros ($5.35 billion) over five years.

Renault and Daimler have been discussing cooperation plans as carmakers worldwide seek to become more competitive by sharing technology investment costs and gaining scale.

— Fast Retailing Co (9983.T: )

Fast Retailing will open its largest global Uniqlo casual wear store in Shanghai next month, covering some 3,600 square meters (38,750 sq ft), Japanese media said.

— Fuji Electronics (9883.T: )

Fuji Electronics, a wholesaler of semiconductors, said operating profit in the year to February 2010 fell nearly 50 percent from a year earlier to 1.29 billion yen ($13.83 million). But the company said it was forecasting a 92 percent jump in operating profit in the year to February 2011, to 2.48 billion yen.

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($1=93.27 Yen)

(Reporting by Elaine Lies; Editing by Michael Watson)

Nikkei to trade in narrow range, defensives strong