Nikkei up over 3 percent, best day in six months

By Elaine Lies

TOKYO (BestGrowthStock) – Japan’s Nikkei average surged over 3 percent to a two-week high on Thursday and had its best one-day performance in six months, with foreign investors tentatively re-entering the market and technical signs turning brighter.

Exporters such as Canon Inc (7751.T: ) rose as the yen weakened against the euro and after investors rushed back into U.S. stocks (Read more about the stock market today. ), having decided that a battering the previous day had gone too far. Kawasaki Kisen (9107.T: ) and other shippers also gained.

But some wariness persisted toward the euro zone’s debt crisis and uncertainty over Japan’s political situation a day after the prime minister said he was resigning.

“Today’s gains are strong, better than I expected, but I think this alone isn’t enough to really give investors confidence that the market has hit bottom for now,” said Toshiyuki Kanayama, market analyst at Monex Inc.

“Still, Wall Street responded positively to good U.S. housing data, which may be a sign that attention is shifting away from Europe after a long period in which indicators were ignored in favor of euro zone issues. We’ll know better after we see the response to tomorrow’s jobs data.”

Forecasts are for a gain of 513,000 in non-farm payrolls for May, up from 290,000 in April.

The benchmark Nikkei (.N225: ) gained 3.2 percent or 310.95 points to 9,914.19 for its best one-day performance since December 3 and its highest close in two weeks. The broader Topix (.TOPX: ) rose 2.4 percent to 890.64.

Orders placed through foreign securities houses before the opening showed net buying to the tune of 600,000 shares, the first net buying in seven trading days.

But Kanayama said that the volume of the buying needed to be bigger, and the buying more sustained, before any trend could be confirmed.

One key point for the Nikkei will be 9,900, a February low and a level that has been both support and resistance in turn, several times, over the past few years.

The benchmark managed to eke out a close above that level on Thursday, and closing Friday trade above that point as well could be one signal that the recent correction is over.

A gap opened up between 10,000 and 9,800 in late May, and the Nikkei may quickly rise to fill this once investors start feeling confident that the benchmark has bottomed out, Kanayama added.

The next level will be psychological resistance at 10,000, followed by the Nikkei’s 25-day moving average, which currently comes in around 10,200.

In another positive sign, the Nikkei’s MACD turned bullish after turning bearish in mid-April.

“The gain by U.S. stocks (Read more about the stock market today. ) is the main driver behind today’s market bounce. The yen also continues to edge down against the euro and dollar, which is encouraging stocks to be bought back,” said Shoji Yoshigoe, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

“That is not to say concerns toward the euro zone have ebbed. The situation continues to be watched with caution following the recent rise in Spain’s short-term yields.”

POLITICAL CONCERNS

The resignation of Prime Minister Yukio Hatoyama on Wednesday in a bid to revive his party’s flagging support did not have a big impact on Tokyo stocks, but the market was keeping a watchful eye as the ruling party geared up to pick a new leader on Friday.

Many expect fiscally conservative Finance Minister Naoto Kan to become the next prime minister. But analysts say it is not definite, making it difficult for investors to factor in.

Trading house Itochu climbed 4.2 percent to 749 yen after it formed an alliance with General Electric (GE.N: ) on investment in large wind and other renewable energy projects.

Automakers got an extra lift after U.S. industry-wide sales climbed 19 percent in May from a year earlier. In addition, Australian new vehicle sales hit a record high for May.

But analysts said the main factor was simply bargain-hunting in auto shares that had languished over the last few weeks, with those with sharper falls, such as Nissan, seeing bigger gains.

Toyota Motor Corp (7203.T: ) rose 3.6 percent to 3,350 yen and Nissan Motor Co (7201.T: ) gained 4.8 percent to 673 yen.

Honda Motor (7267.T: ) gained 4.3 percent to 2,829 yen. Its parts factory in south China resumed full production on Wednesday after more than two weeks of disruption.

Shippers were some of the strongest performers, with the shipping sub-index (.ISHIP.T: ) up 4.3 percent, the second-biggest gainer among the subindexes.

Nippon Yusen (9101.T: ), Kawasaki Kisen K.K. (9107.T: ) and Mitsui O.S.K. Lines (9104.T: ) climbed after Mizuho Securities hiked their ratings and raised their target prices for all three companies, citing revised estimates based on the firms’ results for the business year ended in March.

Nippon Yusen rose 4.7 percent to 336 yen, Mitsui O.S.K. Lines rose 4 percent to 655 yen, and Kawasaki Kisen gained 5.7 percent to 365 yen.

Just under 2 billion shares changed hands on the Tokyo exchange’s first section, the second-heaviest this week. Advancing shares beat declining ones by more than 10 to 1.

Stock Investing

(Additional reporting by Shinichi Saoshiro; Editing by Edwina Gibbs)

Nikkei up over 3 percent, best day in six months