Nikkei up from 6-month low but investors leery of risk

By Aiko Hayashi

TOKYO (BestGrowthStock) – Japan’s Nikkei average rose 0.7 percent on Wednesday a day after tumbling to a six-month low, but worries about the euro zone’s debt crisis and banking system kept the euro weak and financial markets on edge.

Rising tensions on the Korean Peninsula and concerns about a possible “hard landing” for China’s economy (Read more about the fastest growing economy.) have also helped push the Nikkei down about 16 percent in recent sessions from an 18-month high marked in April.

“All eyes are on currency moves, and with the outlook for the euro remaining uncertain, so does the outlook for Japanese stocks,” said Yumi Nishimura, deputy general manager at Daiwa Securities Capital Markets.

“Given the fact that assets other than stocks such as oil have been also sold lately, investors find it hard to jump right back in and keep buying stocks on dips until market conditions stabilize.”

The euro was off lows on Wednesday but investors were looking to sell on every uptick and sentiment remained bearish.

The European currency fell 0.8 percent against the yen to around 110.80 yen and lost 0.5 percent against the dollar to $1.2284.

The benchmark Nikkei (.N225: ) ended up 62.77 points at 9,522.66 after climbing as much as 1.7 percent to 9,622.40 in active trade. On Tuesday the Nikkei dropped 3.1 percent to its lowest finish since November 30.

The broader Topix (.TOPX: ) fell 0.1 percent to 859.00.

Although worries persist, investors took some comfort in a rise in Korean stocks (.KS11: ) as domestic investors picked up bargains after sharp falls the previous day on heightened tensions with North Korea over the sinking of a South Korean ship.

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

Market players noted that technically, the market is now oversold. The Nikkei’s relative strength index (RSI) edged up to 26, but anything below 30 is considered oversold.

But most said that despite this, investors spooked by recent market volatility were taking a wait-and-see stance.

“There’s a lot that investors want to wait and see about right now — (U.S. Treasury Secretary Timothy) Geithner’s trip to Europe this week, what’s going on with China’s economy (Read more about the fastest growing economy.) and of course, what happens with North Korea,” said Noritsugu Hirakawa, a strategist at Okasan Securities.

“Given this, even with encouraging factors such as the rebound on Wall Street, nobody can aggressively buy.”

Major U.S. indexes staged a late rebound that helped Wall Street end mostly flat after first falling more than 3 percent on growing questions about the stability of the European banking system. The S&P 500 ended in positive territory after hitting a six-month low. (.N: )

Geithner heads to Europe on Wednesday, where he is set to press for a united front against tackling the euro zone fiscal crisis, though U.S. and European officials and given no indication if Geithner will propose any new measures to stabilize the region.

EXPORTERS HIGHER

Shares of exporters rose on bargain-hunting after helping Japanese stocks fall to a six-month closing low on Tuesday.

Chip-tester maker Advantest Corp (6857.T: ) rose 2.8 percent to 2,014 yen and Tokyo Electron (8035.T: ) rose 3 percent to 5,220 yen. Olympus Corp (7733.T: ) advanced 2.2 percent to 2,285 yen.

Nippon Yusen (9101.T: ) and other shipping companies rose after the Baltic Exchange’s main sea freight index (.BADI: ), which tracks rates to ship dry commodities, rose 6.2 percent to its highest in six months.

The boost came from better cargo demand and tight vessel availability.

Nippon Yusen climbed 3.2 percent to 322 yen, while Mitsui O.S.K. Lines (9104.T: ) jumped 5 percent to 630 yen.

Trading houses also gained as commodity prices firmed, with metals advancing after steep losses in the previous session and oil rising nearly a dollar toward $70.

Mitsui & Co (8031.T: ) jumped 3.7 percent to 1,251 yen and Mitsubishi Corp (8058.T: ) climbed 3.1 percent to 1,973 yen.

Trade picked up on the Tokyo exchange’s first section, with 2.6 billion shares changing hands, the highest volume in about two weeks. Declining stocks outnumbered advancing ones by nearly 2 to 1.

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(Additional reporting by Elaine Lies; Editing by Edwina Gibbs)

Nikkei up from 6-month low but investors leery of risk