Reuters
Asian Markets
Japan's Nikkei bounces back on surprise U.S. data
Wed, May 02 02:29 AM EDT

* Nikkei recovers from Tuesday's 2-1/2-month closing low * Earnings season yet to boost index * Sharp hits fresh 28-year low on downbeat outlook By Sophie Knight TOKYO, May 2 (Reuters) - Japan's Nikkei share average gained a modest 0.3 percent on Wednesday, buoyed by an easing yen after U.S. manufacturing data beat expectations, but investors were restrained ahead of national holidays and European elections at the weekend. The dollar was lifted by a report from the Institute of Supply Management showing U.S. manufacturing grew at its highest rate for 10 months in April, which in turn pulled the benchmark Nikkei up from the 2-1/2-month low it hit on Tuesday. "A lot of companies have come in with disappointing forecasts for this financial year and the yen is still strong, so it's too early to say where the true support level lies until next week," said Makoto Kikuchi, CEO of Myojo Asset Management Japan. The Nikkei ended up 29.3 points at 9,380.5, below its 13-week moving average of 9,521.19. With volume at a 3-1/2 month low on the main board after just 1.33 billion shares changing hands, market participants said investors were likely holding off from making bold moves in a shortened trading week ahead of a French presidential election and a national election in Greece on May 6, both of which could influence developments in the euro zone debt crisis. The Japanese market will close on Thursday and Friday for national holidays. "Compared to February when a lot of foreigners were buying, there has been a little bit more hesitation," said Jun Yunoki, an equity strategy analyst at Nomura. "Retail investors are buying on the dips. The sentiment is not that bad." The easing yen granting exporters some breathing space after Tuesday's sharp losses. Toyota Motor Corp, Honda Motor Co and Nissan Motor Co Ltd rose by between 0.5 and 1.7 percent. Oil and coal was the best performing sector, with a 1.6 percent gain powered by oil refiner Idemitsu Kosan Co's 4.6 percent jump on the back of stronger-than-expected operating profits for 2011/12. The broader Topix index advanced 0.4 percent to 792.87, but failed to break through the 800 boundary it pierced on Tuesday for the first time since mid-February. Japan Tobacco and Gree Inc provided support as two of the most heavily traded stocks, with gains of 2.4 a nd 2.5 percent, respectively. Japan Tobacco said it was eyeing a cigarette price hike to achieve a 4 percent increase in domestic earnings. Gree, the third-most shorted internet company in Asia according to research firm Data Explorers, said its subsidiary Gree International Inc was to buy smartphone game maker Funzio Inc for $210 million. OPTIMISTIC ON EARNINGS Market consensus is that earnings season, which finishes mid-May, could push the Nikkei back up to the 10,250 level. "I think foreign investors are still underweight on Japanese stocks, so they're going to be careful not to miss the bargain hunting opportunities on the dips," said Kikuchi of Myojo Assest Management. Yet earnings so far have been a mixed bag, with some large companies disappointing investors. Sharp Corp skidded 4.3 percent, hitting a fresh 28-year low and extending the previous session's 9.3 percent slide as investors were downbeat about its outlook, despite the company's predictions of a modest operating profit this business year and Taiwanese company Hon Hai buying a 10 percent stake in the firm. "The news from Taiwan should stop the share price sliding much further, but their finances are still a mess. It's hard to imagine how they can return to growth," said Yasuo Sakuma, portfolio manager at Bayview Asset Management. Morgan Stanley cut its price target on Sharp and kept its "underweight" rating.


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