Nikkei rises on strong U.S. data; Fed meeting in focus

Mon Dec 16, 2013 9:06pm EST

* Index heavyweights regain lost ground
    * Retail investors pick up small caps

    By Ayai Tomisawa
    TOKYO, Dec 17 (Reuters) - Japan's Nikkei share average rose
on Tuesday morning, recouping some of Monday's losses as strong
U.S. manufacturing data lifted sentiment ahead of the U.S
Federal Reserve's policy meeting this week.
    The Nikkei rose 0.9 percent to 15,291.85 after
dropping 1.6 percent to 15,152.91 on Monday, the lowest closing
level since Nov. 20.
    Stronger economic data of late, including Monday's numbers
showing U.S. manufacturing output rose for a fourth straight
month in November and last month's strong payroll report, backed
the view that tapering could start as soon as the Fed's meeting
this week. 
    Also lifting the mood was a strong December PMI reading in
Europe, which was the second-highest since mid-2011.
 
    Monday's notable losers such as index-heavyweight stocks as
SoftBank Corp and Tokyo Electron Ltd regained
ground, up 1.4 percent and 2.0 percent, respectively. SoftBank
was the most-traded stock by turnover.
    Currency-sensitive stocks also were also bought back, with
Toyota Motor Corp rising 0.8 percent and Honda Motor Co
 gaining 1.6 percent.
    Timing the Fed's decision on when it will start winding down
its market-friendly $85 billion monthly bond purchases remains
at the centre of investor thinking, analysts said.
    "Until the outcome of the Fed meeting is out, the currency
level may determine the direction of the Japanese market," said
Yoshiyuki Kondo, an analyst at Daiwa Securities. "Foreign hedge
funds are the main players, and they may create volatility in
the market depending on dollar-yen levels."
    He added that retail investors are refraining from trading
on big caps, instead picking up small caps which have growth
potential, particularly Internet companies that do businesses
with Line Corp, a messaging application services provider
planning to go public next year.
    Such companies include Adways Inc and Netyear Group
, which rose 3.4 percent and 4.5 percent, respectively.
    "Although these small caps can be volatile due to
profit-taking, these shares may stay active until the end of the
year," Kondo said.
    Galvanized by Tokyo's aggressive fiscal and monetary
stimulus aimed at pulling the world's third-largest economy out
of two decades of stagnation, the Nikkei is up 47 percent this
year, on track for its best yearly rise since 1972.
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