Nikkei extends rebound, but investors remain cautious

Mon Aug 11, 2014 10:42pm EDT

* Nikkei tracks gain in Wall Street, Europe
    * Investors remain concerned about Ukraine, Middle East
    * Japan GDP seen showing sharp contraction in economy
    * Hopes of more buying by GPIF help support market
    * Steelmakers, shippers gain; Mixi goes ballistic

    By Hideyuki Sano
    TOKYO, Aug 12 (Reuters) - Japan's Nikkei share average
extended its recovery from two-month low on Tuesday, with buying
interest in steelmakers and shipping companies to the fore, as
investors put geopolitical concerns on a back burner while still
remaining cautious.
    The Nikkei rose 0.4 percent to 15,192.13, extending
its rebound from a low of 14,753 hit on Friday due to the
concerns that conflicts in Ukraine and the Middle East could
hamper world growth.
    The Japanese market took its cue from rise in Wall Street
and European markets, which came despite NATO chief Anders Fogh
Rasmussen warning that there was a "high probability" that
Russia, using the guise of a humanitarian mission, could
intervene militarily in Ukraine. 
    Still, the rebound was capped below 15,256.75, a 50 percent
retracement of its fall from July 31 as investors remained
nervous about geopolitical developments.
    "Nothing has really changed. Russia is as uncertain as ever.
And the more you learn about Iraq, the more doubts you will have
on whether airstrikes alone will solve the problems," said Kyoya
Okazawa, the head of global equities and commodity derivatives
at BNP Paribas in Tokyo. 
    Investors are also cautious ahead of the release of Japan's
April-June GDP data on Wednesday, which is expected to show the
economy shrank an annualised 7.1 percent from the previous
quarter after the sales tax hike in April. 
    A string of soft data on Japanese exports and industrial
output has raised worries that the impact of tax hike could have
been bigger than investors had initially thought.
    "The tax hike is clearly affecting the economy. It's clear
that consumption is still weak in July," said Tetsuro Ii,
president of Commons Asset Management.
    On the other hand, the market drew support from hopes that
Japan's giant public pension fund will increase allocations to
Japanese stocks. 
    "I think the Nikkei is likely to be supported around the
14,000-14,500 area, which should be a good place to enter the
market," Commons Asset's Ii said.
    Steel was the best performer among the Tokyo Stock
Exchange's 33 industry subindexes, with gain of 1.5 percent. JFE
Holdings rose 1.9 percent while Nippon Steel and
Sumitomo Metal gained 1.9 percent.
    Shippers also fared well with rise of 1.1
percent, with both Mitsui OSK Lines and Nippon Yusen
 up 1.1 percent. 
    Smartphone game maker Mixi soared after it almost
tripled its half-year operating profit estimate last Friday.
The shares were untraded with a glut of buy orders, looking set
to rise by daily limit for two days in a row.
    The broader Topix rose 0.5 percent to 1,258.15 while
the JPX-Nikkei Index 400 gained as much to
11,453.59.

 (Additional reporting by Tomo Uetake; Editing by Simon
Cameron-Moore)
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