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Nikkei crawls higher but stalled before earnings

Published 10/13/2009, 02:39 AM
Updated 10/13/2009, 02:42 AM
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* Exporters extend gains, steelmakers rise on upgrade * Eyes on U.S. earnings such as Intel as hopes rise

* Chance of pause in yen rise also gives a lift

By Elaine Lies TOKYO, Oct 13 (Reuters) - Japan's Nikkei average edged up 0.6 percent on Tuesday, buoyed by exporters such as Honda Motor Corp after the S&P 500 posted a sixth straight day of rises, but stalled ahead of key U.S. and Japanese earnings. JFE Holdings and other steel shares climbed after Goldman Sachs hiked its ratings on the companies and upgraded its coverage views on the steel sector in Asia to "attractive" from "neutral", saying demand for steel is likely to rise in 2010.

But trade was lacklustre ahead of corporate earnings reports in the United States and Japan, with major companies including Intel Corp due to report earnings later in the day.

"Though a lot of investors held back during the morning out of a wish to wait for Intel's results, it seems now that some buying is emerging simply on expectations," said Takashi Ushio, head of the investment strategy division at Marusan Securities. "On top of indicators being good, there's hopes that the July-September results will prove better than thought, prompting buying -- much as happened this summer when markets rallied on expectations."

Others said views that a recent rise in the yen might be coming to an end helped underpin the market. The dollar edged up to around 89.90 yen.

Many Japanese exporters have set their exchange rate assumptions for the dollar at around 90-95 yen for the financial year to March, with any yen advances raising worries about the negative impact on earnings.

The benchmark Nikkei gained 60.17 points to 10,076.56, while the broader Topix rose 0.4 percent to 901.40. Tokyo markets were closed Monday for a holiday. Intel's earnings were being keenly watched due both to its benchmark status and for clues to the health of the U.S. economy, market players said.

"When Intel reports earnings, its outlook will likely be particularly in focus. If chip makers were to say they expect demand to increase, that would mean the economy is on the mend," said Mitsuo Shimizu, deputy general manager at Cosmo Securities.

But others said the positive impact of even strong earnings was likely to be limited in Japan.

"Good results from Intel could potentially boost shares in companies such as TDK and Kyocera, but Japanese companies are also likely to face pressure from a stronger yen," said Masayoshi Okamoto, head of dealing at Jujiya Securities.

"Though there's likely to be a knee-jerk positive reaction right after the results come out, the longer-term fundamentals in Japan are quite different."

EXPORTERS GAIN

Market players said the Nikkei would also need some fresh positive factors in order to break above its 25-day moving average, currently around 10,125.

But exporters gained a boost after the S&P 500 managed a sixth consecutive day of gains on Monday to end at its closing high for the year as energy shares rose along with the price of oil. Honda rose 2.2 percent to 2,810 yen, while Advantest Corp gained 3.2 percent to 2,450 yen and Kyocera Corp gained 1.3 percent to 8,090 yen.

JFE rose 4.8 percent to 3,270 yen, while Nippon Steel also gained 4.8 percent to 353 yen. Kobe Steel added 2.5 percent to 167 yen.

The iron and steel subindex rose 3.6 percent to become the biggest gainer among the subindexes.

Japan Airport Terminal Co soared 18.6 percent to 1,274 yen after Transport Minister Seiji Maehara reportedly indicated that he wanted Tokyo's mostly domestic Haneda airport to become a hub for international flights.

Japan Airport Terminal owns the Haneda airport terminal building.

Japan Airlines Corp plans to ask its creditors to forgive it 250 billion yen ($2.8 billion) in debt as part of a new turnaround plan, Kyodo news agency reported on Tuesday. The struggling airline, Asia's largest by revenue, is also considering expanding its planned job cuts to more than 9,000 from 6,800 and will seek to boost its capital by 150 billion yen, Kyodo said, citing sources close to the matter.

JAL shares lost 2.9 percent to 133 yen. Trade was light on the Tokyo exchange's first section, with 1.8 billion shares changing hands, below last week's daily average of 2.1 billion.

Advancing stocks outnumbered declining ones by nearly 2 to 1. (Additional reporting by Aiko Hayashi; Editing by Michael Watson)

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