Nikkei continues bullish streak on weak yen, BOJ easing hopes
* Hopes for easing from BOJ supports market * China-related stocks extend gains * Google, Microsoft earnings hurt Yahoo Japan By Sophie Knight TOKYO, Oct 19 (Reuters) - Japan's Nikkei share average was flat on Friday morning, as expectations of more easing from the Bank of Japan were balanced by disappointing earnings from Google Inc and Microsoft Corp. However, the benchmark was still on track for its biggest weekly gain in a year as robust risk appetite kept the yen soft, boosting exporters, while China-related stocks extended gains after data on Thursday hinted the country's slowdown is bottoming out. "The deceleration of China's economy seems to have dropped its pace, which is a supporting factor, but basically people are adjusting their positions before the BOJ meeting," said Hideyuki Ishiguro, senior strategist at Okasan Securities. The central bank is expected to admit at its next policy meeting on Oct. 30 it will miss its 1 percent inflation target for several years to come, according to sources, as it comes under fresh political pressure to contain the effects of a global slowdown on Japan's export-reliant economy. "The focus is now not on whether they will ease or not, but rather what kind of easing they will do. They understand that if they don't put out something impressive enough to convince the markets it will hurt the economy," Ishiguro said. The Nikkei dropped 0.8 point to 8,982 yen after topping 9,000 earlier in the morning for the first time in three weeks, with the banking sector and real estate outperforming the index on hopes for monetary easing. The index is currently up 5.5 percent up on the week, set for the biggest gain since early December 2011. Less pessimism about dwindling demand in China helped industrial robotics maker Fanuc Ltd, which has large exposure to the country, gain 2.7 percent, lending 13.2 positive points to the index. Similarly, machinery construction maker Komatsu Ltd , often used as a barometer for sentiment towards China, was just behind Fanuc as the third-most traded stock on the main board, moving up 1.8 percent. Yahoo Japan slipped 2.8 percent after Google's third-quarter earnings and revenue came in well under forecasts after its core advertising business slowed, sending its shares down 8 percent, while Microsoft's quarterly profit fell more than expected, hurt by the industry-wide slump in PC sales. "There was bad news from Google and it's the last day of a week in which the Nikkei has added 400 points, so I think we could see some profit-taking on cyclicals today," said Masayuki Doshida, senior market analyst at Rakuten Securities. However, earnings in the U.S. have on the whole come in stronger than expected, leading investors to judge last week's aggressive sell-off as overdone and to buy back some battered stocks. NEC Corp bounced back 8.9 percent after falling 4.6 percent on Thursday, after the Nikkei daily said its operating profit for the April-September half had likely expanded sixfold on the previous year and overshot guidance of 1 billion yen ($13 million) due to stronger-than-expected demand for its business systems. The Nikkei said sales for the period were likely to top the 1.4 trillion yen ($17.7 billion) mark. In an opposite move, Hino Motors Ltd lost 1.7 percent as investors sold the stock on a report of strong earnings, taking profits after the share price rallied 13.3 percent this month on speculation of positive profits. The Nikkei daily reported that the vehicle maker's operating profit will probably come in at a record 30 billion yen ($379 million) for the April-September first half after sales for trucks and buses in Southeast Asia rose 40 percent. The broader Topix index added 0.1 percent to 752.68.
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