Nikkei up 1.6 pct on EU crisis plan, caution remains

By Aiko Hayashi

TOKYO (BestGrowthStock) – Japan’s Nikkei average rose 1.6 percent on Monday, buoyed by a technical rebound after falling over 6 percent last week and by a massive stabilization plan for the euro zone to keep Greece’s fiscal woes from spreading.

Toray Industries Inc (3402.T: ) jumped after signing a 15-year contract with Airbus (EAD.PA: ) to supply carbon fiber materials for the European firm’s aircraft, while Softbank Corp (9984.T: ) rose on news it would start selling Apple Inc (Read more about Apple stock future.)’s (AAPL.O: ) iPad tablet computer in Japan on May 28.

The market took heart from news that European Union finance ministers had agreed an emergency loan package that with IMF support could reach 750 billion euros ($957 billion) to prevent a sovereign debt crisis spreading through the euro zone.

The European Central Bank also announced steps to contain Greece’s debt crisis, saying it would buy euro zone government and private debt, and abandoned resistance to full-scale bond purchases.

Major global central banks also moved to support Europe, reestablishing dollar swap facilities used during the 2007-2008 financial crisis to help ease strain on financial markets and ensure there is enough liquidity to keep global credit markets from seizing up.

Tokyo market players were optimistic but wary, noting that the Nikkei had been on the brink of oversold territory last week in the wake of a massive global stock slide and was due for a bounce anyway. They also cited persistent worries about deep-rooted debt problems in Europe.

“The market welcomed a string of efforts to secure stability in liquidity,” said Kazuhiro Takahashi, general manager at Daiwa Securities Capital Markets.

“But profit-taking is keeping gains in check as the news had been gradually factored in and it’s not as if the core problems have been sorted out yet.”

U.S. stock futures rose about 3 percent, helping the benchmark Nikkei (.N225: ) climb 166.11 points to 10,530.70. The broader Topix (.TOPX: ) rose 1.4 percent to 944.64.

Market players said support was likely to solidify at the level of the Nikkei’s 200-day moving average — around 10,300 — after the benchmark managed to close above it last week.

The Nikkei’s relative strength index (RSI) edged up slightly to 39 after falling to its lowest since November on Friday. Anything from 30 and below is regarded as oversold territory.

Resistance is likely to hold for now at 10,600, the level of the Nikkei’s 100-day moving average.

Trade was moderate, with 2.4 billion shares changing hands on the Tokyo exchange’s first section, well below Friday’s 3.1 billion shares, the highest volume in about four months.

Advancing shares outnumbered declining ones by nearly 5 to 1.

“Investors now want to see how European and U.S. stocks (Read more about the stock market today. ) perform overnight. Caution also remains as reasons behind the abnormal slide in U.S. stocks (Read more about the stock market today. ) last week still haven’t been identified,” Takahashi said.

Eyes are on Wall Street this week with markets still jittery after Thursday’s nearly 1,000-point drop in the Dow Jones Industrial Average, followed by a rebound that still left prices down for the day.

In the latest development, the heads of leading U.S. stock market operators have been called to Washington for an emergency meeting on Monday, days after the spine-chilling plunge in stock prices that continues to perplex U.S. regulators.

TORAY, BRIDGESTONE SHINE

Shares of Toray (3402.T: ) climbed 5.6 percent to 545 yen.

The Japanese textile maker said it has not yet determined the value of the deal with Airbus but the Nikkei business daily reported that it could be worth 200 to 300 billion yen ($2.2-3.3 billion).

Softbank Corp (9984.T: ) jumped 4.5 percent to 2,163 yen, rebounding after falling for the past four trading sessions, as it is set to start selling Apple’s iPad tablet computer in Japan later this month.

Bridgestone Corp (5108.T: ) advanced 4.7 percent to 1,634 yen after Japan’s largest maker of tires said it has raised its operating profit forecast for the six months to June by 61 percent to 50 billion yen on the back of brisk sales.

Shares of companies with exposure to China gained after sliding last week on a combination of worries about Chinese monetary tightening and a fall in Shanghai shares.

Machinery maker Komatsu (6301.T: ) rose 1.9 percent to 1,795 yen and shipper Kawasaki Kisen (9107.T: ) climbed 3.6 percent to 375 yen. Hitachi Construction (6305.T: ) gained 1.6 percent to 1,936 yen.

But shares of Panasonic (6752.T: ) fell 1.8 percent to 1,287 yen after the world’s No.4 flat TV maker forecast full-year operating profit figures below market expectations.

Panasonic expects its operating profit to total 250 billion yen in the year to March 2011, up 31 percent from a year earlier, when profit more than doubled. But the estimate fell short of the 276.5 billion yen consensus from a poll of 20 analysts by Thomson Reuters I/B/E/S.

Stock Market Analysis

(Additional reporting by Elaine Lies; Editing by Michael Watson)

Nikkei up 1.6 pct on EU crisis plan, caution remains