Nikkei rebounds ahead of BOJ, investors expect future easing

Mon Mar 10, 2014 9:55pm EDT

* Investors bet on dovish talk from BOJ
    * Nikkei gains foothold above 50 pct retracement of Jan-Feb
decline
    * Oil and coal companies lead gains after big sales on
Monday

    By Hideyuki Sano
    TOKYO, March 11 (Reuters) - Japan's Nikkei average gained on
Tuesday, reflecting hopes that the Bank of Japan could signal
later in the day its readiness to adopt more stimulus, although
most investors do not expect the BOJ take any action yet.
    Coal and oil companies led gains after they were heavily
sold on Monday, in a possible sign of short-term trade
dominating the market as caution over a slowdown in China and
Ukraine tensions kept many investors on guard.
    The Nikkei average rose 0.5 percent to 15,198.44,
recouping about a half of its losses on Monday to edge near a
five-week high of 15,312.60 hit on Friday.
    "A majority of market players do not expect the BOJ to take 
action today but the market is likely to be supported as long as
the BOJ keeps expectations for future easing alive," said
Toshiyuki Kanayama, senior market analyst at Monex Securities.
    The BOJ is expected to maintain the current asset purchase
scheme on Tuesday on a view the economy can weather a sales tax
increase in April without extra support. 
    But some market players, fretting that the three percentage
point tax hike could undermine consumption when wages are hardly
growing, speculate the BOJ could take pre-emptive action to
bolster the economy.
    Bulls are taking heart from the fact the Nikkei is climbing
above around 15,155, an important 50 percent retracement of its
fall from 16,320 on Dec 30 to 13,996 Feb. 5, which could open a
way for test of around 15,430, a 61.8 percent retracement of the
same decline. 
    Another technically important resistance is seen at 15,279,
its 75-day moving average. 
    "I think the market will likely extend gains gradually as
uncertain factors such as Ukraine and the weather-hit U.S.
economy will disappear," said Kanayama at Monex.
    Tensions between Russia and Ukraine continued with
unidentified armed men firing in the air in Crimea as
they moved into a Ukrainian naval post. Russia said the United
States had declined an invitation to hold new talks on resolving
the crisis. 
    Oil and coal product companies led the gains with
a rise of 1.5 percent, after heavy selling on Monday. Showa
Shell gained 2.6 percent.
    The yen's slight retreat to near the six-week low hit on
Friday also underpinned some exporters, with Honda 
gaining 2.4 percent and Hino Motors rising 2.1 percent.
    The yen stood at 103.29 yen to the dollar, near
Friday's low of 103.77. 
    The broader Topix index rose 0.5 percent to 1234.18
while the JPX-Nikkei Index 400, a gauge comprising
firms with high return on equity and strong corporate
governance, rose 0.6 percent to 11,170.56.
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