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Nikkei steadies, propped up by G8 reassurances
May 21, 2012 / 2:56 AM / 6 years ago

Nikkei steadies, propped up by G8 reassurances

TOKYO (Reuters) - Japan’s Nikkei average inched up on Monday, with short-covering prompting a recovery from the sharp losses of the previous session, and a call from world leaders for Greece to remain in the euro zone helping to soothe investors’ jitters.

A woman walks past a logo of Tokyo Stock Exchange at the bourse in Tokyo May 18, 2012. REUTERS/Yuriko Nakao

The Nikkei .N225 put on 0.3 percent to 8,633.89 after sliding 3 percent on Friday to log a seventh straight week of losses, its longest such run since 2001, as the euro zone debt crisis and concerns over global growth intensified.

“It’s clearly just a little technical correction today,” said Hiroyuki Fukunaga, chief executive of Investrust. “If the Nikkei doesn’t stay above water in the next few days, there’s the danger that short sellers could take advantage again and push prices down further.”

The Topix slipped 0.1 percent to 725.15, with volume hitting a two-week low, indicating a lack of conviction for the rebound.

Market participants concerned about the impact of Greece’s potential exit from the euro zone were given a flicker of hope after leaders of the G8 vowed to combat financial turmoil, but analysts said any positive boost would be short-lived.

“We’re going to have to see something a lot more concrete than that before people start buying in earnest again. Right now it’s just short-covering,” Fukunaga said.

Despite the gains, the Nikkei remained deep in “oversold” territory, with its 14-day relative strength index at 25.2. Thirty or below is considered oversold.

A Deutsche Securities report said that domestic investors were net buyers of Nikkei futures last week, which usually casts a negative influence on the market for two weeks.

Industrial robot maker Fanuc Corp (6954.T) was among the top-weighted gainers, putting on 1.5 percent after the Nikkei newspaper said it would expand production capacity by 30 percent for numerical control equipment, a high profit margin business for the company, by the end of fiscal 2012.

Renesas Electronics Corp (6723.T) sagged 10.3 percent after Goldman Sachs downgraded its rating to “sell” from “neutral”, saying the semiconductor maker may need to raise capital. The stock earlier fell as much as 14.7 percent before paring losses after Mitsubishi Electric Corp (6503.T) said it would work with other parent companies to give support if needed, although Renesas had not yet requested help.

Market participants were waiting to hear the conclusion of a Bank of Japan meeting on Wednesday, the same day that Japan’s trade statistics for April will be released.

“The market isn’t expecting the BOJ to do anything, so it could swing up if they make an unexpected move,” said Eiji Kinouchi, chief technical analyst at Daiwa Securities. “But investor confidence is likely to be knocked by another big trade deficit as crude oil was expensive last month.”

Exporters were pinched by a persistently strong yen, which hovered near a three-month high against the dollar.

Toyota Motor Corp (7203.T), Nissan Motor Co (7201.T) and Nikon Corp (7731.T) lost between 0.8 and 1.2 percent.

Editing by Nick Macfie

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