TOKYO (Reuters) - Japan’s Nikkei share average was expected to rebound from a four-week low on Tuesday after comments from European Central Bank President Mario Draghi supported expectations that the bank will soon act to help deeply indebted euro zone states.
Market players said the Nikkei .N225 was likely to trade between 8,750 to 8,850 on Tuesday, and is expected to regain a foothold above a major support level at the 13-week moving average, which it snapped on Monday.
U.S. markets were closed overnight for the Labor Day holiday, but European stocks ended up, boosted by expectations that the European Central Bank will step in to bring down punishingly high borrowing costs for Spain and Italy.
Draghi was reported as saying on Monday that the purchase of sovereign bonds with a maturity of up to three years by the central bank would not breach EU rules, easing worries about the plan’s potential hurdles.
Kenichi Hirano, operating officer at Tachibana Securities, said he thought the news from Europe would lift Japanese stocks, but that expectations for Thursday’s ECB meeting were not the main factor determining sentiment.
“The market’s direction is not hinging on this ECB market, or even the U.S. payroll figures on Friday, because neither are going to throw up massive surprises,” he said.
“Investors are more concerned about what happens in next week’s FOMC,” Hirano added, referring to the Federal Open Market Committee on September 12-13, where the Fed could announce a further round of bond buying to stimulate the flagging U.S. economy.
Hopes for such a move, based on comments by Fed Chairman Ben Bernanke on Friday, were crowded out by concerns about soft Chinese data on Monday, which pushed the Nikkei down for the third straight session to a four-week low of 8,783.89.
September tends to be the weakest month for the benchmark index, which has fallen an average of 1.2 percent between 1971 and 2011.
> European stocks rise as ECB hopes eclipse grim data .EU > Bunds fall but market cautious before ECB meeting <GVD/EUR> > Euro steady but market wary of post-ECB backlash <FRX/> > Gold near 5-month highs after Fed QE signal <GOL/> > Oil rises, stimulus hopes outweigh weak Chinese data <O/R>
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Reporting by Sophie Knight; Editing by Richard Pullin