Nikkei rises to one-week high on soft yen, brighter view on earnings

Wed Oct 17, 2012 2:49am EDT

* Weaker yen boosts exporters
    * Strong financial earnings in the U.S. improves sentiment
    * Chipmakers lose out after Intel disappoints
    * Yahoo Japan gains after strengthening Facebook ties

    By Sophie Knight
    TOKYO, Oct 17 (Reuters) - Japan's Nikkei share average
gained 1.2 percent on Wednesday after the yen eased to a
one-month low against the euro and dollar, and investors took a
sunnier view of earnings.  
    Exporters such as Toyota Motor Corp were given a
leg up by a stronger euro as rating agency Moody's stopped short
of downgrading Spanish bonds to "junk" status, affirming them at
BAA3 in light of the European Central Bank's pledge to buy the
bonds if needed.
    "The three main factors today are the weaker yen, the fact
the Nikkei had hit the bottom of its trading range, and that
even companies that cut forecasts are no longer falling," said
Shigeo Mito, manager of equity investment at Sumitomo Mitsui
Trust.
    Hitachi Ltd rose 2.4 percent and was the
fourth-most-traded stock on the main board by turnover, two
places behind Toyota, as JPMorgan reiterated its "overweight"
rating, saying it was likely to meet its 2012 operating profit
guidance. However, JPMorgan lowered its own profit outlook for
the firm.
    The securities sector jumped 2.5 percent, with
Nomura Holdings Inc up 3.2 percent after being fined
just 300 million yen ($3.8 million) for leaking client
information, and Goldman Sachs raised expectations for the
financial sector by doubling revenue and raising its quarterly
dividend. 
   Those gains helped the Nikkei advance 105.24 points
percent to 8,806.55, i ts highest close since Oct. 5 and a bove
its 14-day moving average at 8,741.81. 
    "I think that the weakness in the global economy and the
expectations of poor earnings were pretty much priced in last
week and now we're recovering from that sell-off," said Masayuki
Otani, chief market analyst at Securities Japan.
    "Consensus cooled down quite a lot and now people are
realising it might have gone too far."
    
    A YEN FOR BUYING 
    The benchmark dropped 3.7 percent last week, its biggest
weekly fall since May, after a stream of profit warnings sparked
fears of earnings coming in lower than expected, due to a global
slowdown, anti-Japanese sentiment and the robust yen.
    A strong yen has prompted fears of further cuts to earnings
forecasts for exporters as it erodes their revenues garnered
abroad once repatriated. Its retreat on Wednesday helped Toyota
add 1 percent after the share dropped 3.6 percent last week.
    "If the euro and the won continue to get stronger I think
sentiment might become a bit more 'risk on'," said Yasuo Sakuma,
portfolio manager and executive officer at Bayview Asset
Management. The yen struck a 5-1/2 month low against the Korean
won on Wednesday.
    "This could be a turning point, but it's really too early to
tell."
    Although a strong yen hurts exporters, some Japanese firms
have begun using the robust currency and low borrowing rates to
their advantage, snapping up foreign firms at reasonable prices.
    This trend was brought into focus by Softbank Corp's
 $20 billion deal to buy a 70 percent stake in Sprint
Nextel Corp, announced this week.
    The mobile provider, an index heavyweight, added 5.6 percent
on Wednesday to extend Tuesday's 9.6 percent rise on CEO
Masayoshi Son's assurance that the move would not dilute
Softbank shares. The shares dropped over 20 percent over Friday
and Monday on uncertainty about how the deal would be funded.
    Also on Wednesday, major trading house Mitsubishi Corp
 added 0.5 percent after the Nikkei daily said it would
buy a 20 percent stake in Indonesian utility Star Energy for
$200 million, aiming to double capacity of a geothermal plant in
West Java by 2017.  
    Elsewhere, chipmakers sagged after Intel Corp, the
world's largest chipmaker, forecast gross margins for the
current quarter below expectations. Ibiden Co
Ltd lost 3.8 percent and Advantest Corp fell
2.2 percent. 
    Yahoo Japan Corp rose 4.6 percent to 30,050 yen,
its highest level since March 2011, as investors hoped that the
new services it introduced on Tuesday as part of an ongoing
tie-up with Facebook Inc, would win more users for its
portal and search services, increasing advertising revenue.
    The broader Topix added 1.1 percent to 740.78 in 
strong trade, with volume at 115.8 percent of its average over
the past 90 sessions.
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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