Nikkei up 1.7 percent on yen, advances towards resistance

By Elaine Lies

TOKYO (BestGrowthStock) – Japan’s Nikkei climbed 1.7 percent on Friday, advancing toward a key resistance level, on signs of health in the euro debt market and a halt in the yen’s advance against the euro.

Financial stocks such as Mitsubishi UFJ Financial Group rose after Japan’s Banking Minister Shizuka Kamei, an advocate of financial regulation, said he would step down to protest that a controversial postal bill would not be passed in the current session of parliament.

In Europe, a bond sale by Spain saw strong demand, a positive sign amid worries about appetite for debt from struggling European nations. The euro rose more than 1 percent against the U.S. dollar to trade above $1.21 in New York trade.

“The euro’s rebounded and there have been some supportive factors emerging from the euro zone,” said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley Securities.

“Also, it seems as if there had been selling pressure from a large number of options taken out on the idea that the market was in a downward trend, but this pressure went away this morning when Nikkei options settled.”

In active trade due to the settlement of futures and options, the benchmark Nikkei rose 162.60 points to 9,705.25 but was down 2 percent for the week, its biggest weekly decline in three weeks.

The broader Topix rose 1.1 percent to 866.44.

The index remained below its 25-day moving average of around 9,900, but its relative strength index rose to 42, with 30 and below considered oversold, while its MACD powered solidly upwards after narrowly averting a bearish cross earlier this week.

Resistance is likely around 9,850, the bottom of the Nikkei’s Ichimoku cloud, and then at 9,900. Analysts said the market could test these levels over the near term.

“Funds have started to lean toward risk-taking after all-out risk-reduction behavior seen in mid- to late May, and domestic investors are following suit,” said Tsuyoshi Segawa, an equity strategist at Mizuho Securities.

Nikkei futures and options contracts expiring in June likely settled at 9,747.59, Tokyo market participants said, citing estimates by local brokerages.

The official settlement price will be announced by the Osaka Securities Exchange after the market closes on Friday.

SHARP ADVANCES

Amid a general rise for tech firms, Panasonic Corp advanced 6.9 percent to 1,220 yen, while Sharp Corp jumped 3.9 percent to 967 yen.

Morgan Stanley MUFG hiked its rating on Sharp to “overweight” and raised its target price, saying the stock has priced in a negative scenario, especially regarding the LCD business.

Shares of exporters gained on a halt in the advance in the yen and after U.S. stocks (Read more about the stock market today. ) rallied some 3 percent. Camera and copier maker Canon Inc climbed 1.9 percent to 3,715 yen.

The euro added 0.1 percent to around 110.75 yen, after jumping more than 1 percent a day earlier. The dollar rose to around 91.56 yen.

Many Japanese exporters have set their currency assumption rates for the euro around 120-125 yen for the year to March, and for the dollar around 90-95 yen. Investors fret about a stronger yen as it eats into exporters’ profits when repatriated.

Among banking stocks, Japan’s top lender Mitsubishi UFJ gained 3.1 percent to 429 yen. Sumitomo Mitsui Financial Group pared gains to rise 1.4 percent to 2,647 yen.

Analysts said the resignation of Kamei was positive for financial stocks, although his party is expected to stay in the ruling bloc ahead of an election expected next month.

“It was a bit unusual for somebody from such a tiny political party to have this much importance, and with him gone the Kan administration is likely to strengthen its foundation going into the election,” said Yamagishi at Mitsubishi UFJ Morgan Stanley Securities.

Some 2.8 billion shares changed hands on the Tokyo exchange’s first section, the highest since May 2. Advancing shares outnumbered declining ones by nearly 4 to 1.

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(Additional reporting by Aiko Hayashi; Editing by Edwina Gibbs)

Nikkei up 1.7 percent on yen, advances towards resistance