Nikkei pares gains as steep losses in China markets temper US optimism

Sun Jul 7, 2013 10:16pm EDT

* Nikkei and Topix both rise 0.1 pct
    * Losses in Chinese stocks create headwind
    * Heavyweight Fast Retailing buoys benchmark
    * Nikkei 15,000 in sight this week - analyst

    By Tomo Uetake
    TOKYO, July 8 (Reuters) - Japan's Nikkei share average pared
gains from an early push to  a fresh 5-1/2 week high on Monday
morning, as sharp losses in Chinese equities tempered optimism
stemming from strong U.S. jobs and a weaker yen.
    The benchmark Nikkei advanced 0.1 percent to
14,322.22 in midmorning trade, after rising as high as 
14,497.65, a level not seen since May 29, on the back of upbeat
U.S. jobs data suggesting the world's largest economy was on a
solid footing.
    The broader Topix index edged up 0.1 percent
1189.55.
    Both indices erased much of their morning gains as Hong Kong
shares extended early losses, with Chinese growth plays hurt
after Beijing said it would cut off credit to force
consolidation in industries plagued by overcapacity.
    "It was the tumble in Chinese stocks that sent the Nikkei
and Topix lower. But I think the Japanese markets have become
less vulnerable to volatile Chinese markets than late June,"
said Hiroaki Hiwada, a senior strategist at Toyo Securities.
    At 0205 GMT, the Hang Seng Index was down 2.4
percent, while the China Enterprises Index of the top
Chinese listings in Hong Kong was down 2.8 percent. The Shanghai
Composite Index was down 2.2 percent.
    "There are so many positive factors encouraging buyers but
at the same time, there is some feeling of overheating in the
market. So profit-taking is quite likely," said Toshiyuki
Kanayama, senior market analyst at Monex Inc.
    Data on Friday showed U.S. jobs growth was better than
expected in June and the two previous months of gains were
revised higher, increasing the likelihood that the U.S. Federal
Reserve will begin cutting its massive monetary stimulus, known
as quantitative easing, as early as September. 
    The dollar posted broad gains, and U.S. stocks surged as
equity investors were cheered by the strong economic momentum
which offset some of the concerns over a reduction of the Fed's
stimulus.
    The yen hit a 5-1/2-week low of 101.47 yen to the
dollar in early Asian trade on Monday. The pair last traded at
101.15 yen, according to EBS data.
    Index heavyweight Fast Retailing Co advanced 2.2
percent and contributed 32 positive points to the benchmark
Nikkei, helped by index-related buying and hopes for quarterly
earnings due Thursday.
    Daiwa House Industry Co tumbled 8.4 percent after
the construction company said it would raise up to 137.8 billion
yen ($1.4 billion) by issuing 60.5 million new shares and sell
20 million of its own.
    The Nikkei is down 10 percent from a 5-1/2-year high touched
on May 23, hurt by slowing growth in China and concerns of an
imminent rollback of the Fed's bond-buying programme. However,
it's still up 38 percent this year, underpinned by the Japanese
government's sweeping stimulus policies.
    "There is no big reason to sell stocks at the moment," said
Kenichi Hirano, a strategist at Tachibana Securities. "I think
the Nikkei's rise to 15,000 is well in sight this week."
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