Nikkei strikes above 9,000 to mark best weekly gain this year

Fri Oct 19, 2012 2:56am EDT

* Hopes for easing from BOJ support market
    * China-related stocks extend gains
    * Google, Microsoft earnings hurt Yahoo Japan
    * NEC jumps after earnings overshoot guidance by a mile

    By Sophie Knight
    TOKYO, Oct 19 (Reuters) - Japan's Nikkei share average
topped the 9,000 level on Friday to log its best weekly gain in
nearly a year as expectations of easing from the Bank of Japan
and robust risk sentiment on the back of an improved global
outlook softened the yen for the seventh day.
    The benchmark also marked a fresh three-week high after a
steep four-day rally, as an easier yen benefited exporters and
China-related stocks climbed higher after data on Thursday
suggested 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, referring to
the Bank of Japan.
    At its next policy meeting on Oct. 30, the central bank will
likely cut its growth forecasts and may debate expanding its
asset-buying programme, to contain the effects of a global
slowdown on the export-reliant economy, sources familiar with
its thinking said. 
    "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 inched up 0.2 percent to 9002.68, logging a gain
of 5.5 percent since last Friday's close that marked its best 
weekly performance since early December 2011. 
    The benchmark made several tentative forays into negative
territory through the day, however, as some investors took poor
earnings from U.S. tech firms to take profits on cyclicals that
saw big gains this week.
    Yahoo Japan slipped 2.3 percent after Google's
 third-quarter earnings and revenue came in well under
forecasts as 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.
  However, earnings in the U.S. have overall been 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 10.5 percent following a drop of 4.6 
p ercent on Thursday, after the company surprised investors by
raising its guidance for the period to 47 billion yen ($593
million) from a previous forecast of 1 billion yen, after
restructuring boosted profit margins. 
    The broader Topix index added 0.3 percent to 754.39
in strong trade, with 1.75 billion shares trading hands,
although it had ebbed from Thursday's 2.01 billion, the highest
volume in a month.

    TIME TO REIN BACK OPTIMISM?
    Optimism that China's slowdown might have bottomed out
helped industrial robotics maker Fanuc Ltd, which has
large exposure to the country, gain 3.9 percent, lending 20
positive points to the benchmark. 
    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 2.8 percent.
    Komatsu's gains helped the machinery subindex to
be the best-performing sector, with air-conditioner maker Daikin
Industries Ltd also rising 4.2 on a softer yen and news
it will release a dehumidification system for factories that
consumes 60 percent less electricity. 
   However, there were some doubts that the Nikkei would be
able to hang onto the week's gains as the earnings season moves
into higher gear from next week, with the majority of firms
expected to lower their outlook for the rest of the year.
    For some, increased optimism surrounding China, Japan's
biggest export market, is overdone, considering there is little
sign of the economy picking back up and boycotts of Japanese
products on the back of a territorial dispute continue. 
    "It's not as if the problems with China have gone away or
been fully priced in, people have just forgotten about them, as
with the euro zone," said Makoto Kikuchi, CEO OF Myojo Asset
Management.
    A Bank of America Merrill Lynch report said that 38 percent
of investors are now underweight on Japanese stocks, 15 percent
more than in September, while 20 percent deemed the country's
equity market unfavorable because of expected weakness in
corporate earnings, 6 more than last month.
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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