November 5, 2010 / 1:59 AM / 9 years ago

Nikkei up over 2 pct, poised for best week in year

* Stocks buoyed by short-covering, resource stocks climb

* Hopes for more liquidity in markets also help Nikkei

* Resona tumbles on $6.2 bln share issue news; Nissan up

By Aiko Hayashi

TOKYO, Nov 5 (Reuters) - Japan’s Nikkei average jumped 2.6 percent on Friday, led by short-covering and gains in resource shares after the Federal Reserve’s plans to buy more Treasuries prompted investors to seek risk elsewhere, prompting rallies in global stocks and commodities.

Japanese stocks built on sharp gains made the day before, with the benchmark Nikkei .N225 poised for a rise of more than 4 percent on the week. If it books a weekly gain of more than the 4.19 percent hit in mid-September, it would be its best week in a year.

Amid broad-based gains, Nissan Motor Co (7201.T) stood out by jumping more than 6 percent after the automaker bumped up its annual guidance past market forecasts as brisk car sales absorb currency losses. [ID:nTOE6A306S]

Despite this week’s gains, however, Tokyo has lagged behind other stock markets, hit by persistent worries about the impact of the strong yen on corporate earnings and a fragile economic recovery.

The Nikkei’s three-week highs hit on Friday compare with U.S. stocks’ surging to levels last seen before Lehman Brothers’ collapse in 2008.

“Short-covering is the main driver of today’s gains, but foreign investors appear to be picking up shares of companies that are sensitive to economic cycles such as trading houses after rallies in oil and gold,” said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities.

“Hopes for more liquidity in the financial system are spreading after the United States announced additional easing. But the Japanese market still lacks appeal because of domestic factors such as slow recovery measures against deflation and the strong yen.”

The benchmark Nikkei .N225 gained 239.68 points to 9,598.46 and rose as high as 9,616.01 at one stage, its highest since mid-October.

The broader Topix .TOPX added 2.3 percent to 835.40.

Analysts expect next targets for the Nikkei to stand around 9,700, a high hit last month, and then around 9,800, a July high.

Another notable stock was Resona Holdings (8308.T). It tumbled 16.3 percent to 512 yen after sources said the Japanese bank plans to raise about $6.2 billion in its first public stock offering since it was effectively nationalised in 2003. [ID:nTOE6A308B]

In early Asian trade the dollar fetched 80.85 yen JPY=, not far from its all-time low of 79.95 yen. [FRX/]

The U.S. Standard & Poor's 500 Index .SPX gained 1.9 percent to 1,221.06, its highest level since September 2008. [.N]

The Fed said on Wednesday it would spend $600 billion buying longer-term Treasury bonds until the end of next June as part of a renewed quantitative easing programme. Stocks in general benefit because of the impact of a huge wave of liquidity flowing into the financial system.

The Bank of Japan is expected to hold off on new policy steps on Friday when it ends a two-day meeting.

Japan’s central bank announced its own, more modest 5 trillion yen ($62 billion) asset buying plan last month and brought forward its policy review from mid-November to get the scheme under way as soon as possible. [ID:nTOE6A306M]

“With the outcome of the BOJ’s meeting expected later today and the yen being a bit stronger, if the yen advances further after the BOJ news the Nikkei could pare gains and move in a range, eyeing the U.S. jobs data release,” said Kazuhiro Takahashi, general manager at Daiwa Securities Capital Markets.

Economists in a Reuters poll expect 60,000 jobs were created in October after 95,000 were lost in September.

RESOURCE STOCKS HIGHER

Resource-linked stocks rose after energy and commodity prices gained, with gold touching record highs. Sumitomo Metal Mining (5713.T) jumped 5.1 percent to 1,366 yen and trading firm Mitsui & Co (8031.T) climbed 4 percent to 1,314 yen.

Markets concluded the Fed’s move to increase the supply of dollars would likely weigh on the currency further. But it also benefits dollar-priced commodities, as it cuts their cost for holders of other currencies. [COM/WRAP]

Shares of exporters gained. Canon Inc (7751.T) rose 2.7 percent to 3,880 yen and Advantest (6857.T) gained 4.7 percent to 1,565 yen. Honda Motor (7267.T) was up 4.3 percent at 2,884 yen.

Nissan shares rose 6.2 percent to 766 yen. (Editing by Michael Watson)

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