Nikkei jumps 2.5 pct as U.S. economy concern fades

First Published:	27/09/2006 12:46:48
The Nikkei average jumped 2.51 percent on Wednesday, its biggest one-day gain in two months, as exporters such as Shin-Etsu Chemical Co. Ltd. and Canon Inc. (7751.T: Quote, NEWS, Research) gained on receding concerns about the U.S. economy, a key market for Japanese products. Stronger-than-expected U.S. consumer confidence data eased concerns of a slowdown in the world's No.1 economy, while bank shares bounced back, helped by the view that their prices had fallen too far recently. The banking sector (.IBNKS.T: Quote, NEWS, Research) rose 4 percent, having fallen about 10 percent in the past month. "Consumer confidence data showed individual spending -- the main engine of the economy there -- stands tall thanks to a fall in energy costs, reversing earlier pessimism," said Tsuyoshi Nomaguchi, a strategist at Daiwa Securities. The Nikkei <.N225> finished 390.42 points higher at 15,947.87, its highest close since September 7. The boarder TOPIX index <.TOPX> gained 2.69 percent to 1,591.04, its highest close since September 19. Investors were also relieved that new Prime Minister Shinzo Abe's cabinet, announced on Tuesday, looks likely to support a recovery in the domestic economy driven by the private sector. "Expectations had been low, but it's good to see that the new government seems set to maintain its predecessor's non-intervention policy toward the private sector," said Koichi Takatsuka, a senior fund manager at United Investments. Unlike the U.S. blue-chip Dow Jones index <.DJI> which extended recent gains to hit its second-highest close ever on Tuesday, the Nikkei has had difficulty in moving away from a narrow range centering on 16,000 in the past month. The Nikkei is still 9 percent below a year-to-date high marked in April, when according to market analysts share prices widely factored in double-digit growth in earnings in the financial year to next March. It is 60 percent off a lifetime high hit at the peak of Japan's asset bubble in 1989. CAUTION REMAINS Shares of exporters rose after a surprisingly strong reading in U.S. consumer confidence on Tuesday, which also helped push the dollar up against the yen. A weaker yen inflates the profits that Japanese companies earn abroad when repatriated home. Investors had been worried about the possibility of a hard landing for the U.S. economy. Shin-Etsu, which makes almost 70 percent of its sales abroad, hit a lifetime high of 7,570 yen before ending the day up 4.3 percent at 7,560 yen. Shares of the world's biggest silicon wafer maker reclaimed a level marked soon after the company's announcement of a $1 billion investment plan last week. But some market analysts are cautious as Wednesday's limited trading volume suggested market gains were led partly by quick unwinding of positions by those who had sold large-cap shares and index futures earlier. "I doubt if this is a meaningful rally," United's Takatsuka said. "It looks like just a broad-based rebound, not as a result of bargain-hunting of select stocks." Masahiko Sato, executive director at Nomura Securities' product marketing department, also said a knee-jerk reaction to the Dow's recovery helped Wednesday's rally in Tokyo. Technical indicators suggested the Tokyo market had gone too far in a negative direction and was ready for a turn-around, he said. "Although the Nikkei rose more than 350 points, I couldn't feel real energy in the market," Sato said. CANON HITS HIGH Printer and camera maker Canon, which makes over 75 percent of its sales outside Japan, rose 3.2 percent to 6,090 yen. It hit a record high of 6,100 on a share-split adjusted basis. Toyota Motor Corp., the world's No.2 auto maker, which raised its half-year profit goal last week, gained 2.1 percent to 6,370 yen. Shares of Sumitomo Mitsui Financial Group Inc. jumped 4.4 percent to 1.2 million yen after a source close to the matter said Japan's third-largest lender is considering repaying the nearly $6 billion it owes the government by the end of the year, three months ahead of schedule. In contrast, Sharp Corp. fell 1.2 percent to 2,020 yen on concerns about dilution of share value after the consumer electronics maker announced a plan to issue convertible bonds. Trade volume rose from a 14-month low marked the previous day, with 1.54 billion shares changing hands on the Tokyo exchange's first section. That was still well below last year's daily average of 1.90 billion shares. Advancers outnumbered decliners by a ratio of 16 to one.
Source:  Reuters http://www.reuters.com