Nikkei rises but gains capped by caution on Europe

TOKYO, Dec 5 — The Nikkei stock average edged higher today to build on last week’s hefty gains on improved sentiment about the European debt situation, but uncertainty about how markets will assess Italy’s new austerity plan capped the upside.

Italy’s Cabinet approved a package of tax hikes, pension reforms and incentives to boost growth on Sunday. Prime Minister Mario Monti will present the €30 billion (RM124.62 billion) plan to parliament today.

“On the face of it, the Italy news doesn’t seem bad for markets, but Japanese investors need to see the reaction of European and US markets to the plan before they can confirm that it’s good news,” said Masayoshi Okamoto, head of dealing at Jujiya Securities.

“The €30 billion amount, is it too much, too little, or just right? We need to see what the market thinks of it,” he added.

Key European events later this week remained in focus as well.

On Thursday, the European Central Bank will hold a regular policy meeting and is expected to cut interest rates. European Union leaders will also meet on Thursday and Friday, to seek agreement on a convincing rescue plan.

The Nikkei rose 0.4 per cent to 8,680.78 by the midday break, adding to its 6 per cent gain last week. The broader Topix added 0.4 per cent to 747.12.

Volume was relatively thin, with 736 million shares changing hands so far, compared with last week’s average full-day volume of 1.65 billion shares.


Strategists said one positive technical sign for the Nikkei is that it is now trading above its 25-day moving average, at 8,563.

The index also briefly broke above 8,700 for the first time in nearly a month, reaching an intraday high of 8,704.48 shortly after the open.

“The Nikkei’s recovery from recent lows is hopeful, but macroeconomic factors such as developments in Europe as well as China’s economic outlook are also key for the direction of Japanese stocks,” said Kenichi Hirano, operating officer at Tachibana Securities.

Japanese financial stocks outperformed the broader market. The banking subindex rose 1.8 per cent, tracking US financials, which were the biggest gainers on Friday boosted by a drop in the US unemployment rate.

Sumitomo Mitsui Financial Group rose 2.7 per cent to ¥2,222 (RM88.33) and Mitsubishi UFJ Financial Group added 2.1 per cent to ¥345.

The securities subindex gained 2.7 per cent and was the top performing sector, as the market’s overall rise raised hopes of higher earnings for brokerages. The subindex had lost 30 per cent since July, but regained some ground, rising 10 per cent since hitting a lifetime low on November 24.

Nomura Holdings Inc gained 3.5 per cent to ¥264 and rival Daiwa Securities Group Inc rose 2 per cent to ¥261.

Olympus Corp added 1.1 per cent to ¥1,079. An investigative panel has found the firm hid up to US$1.7 billion (RM5.27 billion) in losses from its investors, but is likely to say there is no evidence of involvement by organized crime in the cover-up, a source said on Monday.

Fast Retailing Co Ltd rose 3.7 per cent to ¥12,950 after the operator of the Uniqlo clothing chain said on Friday domestic same-store sales in November fell 1 per cent from a year earlier, an improvement from a 4 per cent drop in October. — Reuters 



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