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Nikkei claws up 0.4 pct, caution before jobs data

Published 09/02/2010, 10:20 PM
Updated 09/02/2010, 10:24 PM

* Good US data adds to investor reassurance on global economy

* Wariness ahead of jobs data likely to cap Nikkei near 9,200

* Recovery now likely cyclical, too early to trust - analyst

* MACD points up after bullish cross

By Elaine Lies

TOKYO, Sept 3 (Reuters) - Japan's Nikkei average crawled up 0.4 percent on Friday as more encouraging data reassured investors about the state of the global economic recovery and sparked short-covering.

But gains are likely to be capped by wariness ahead of closely-watched U.S. August non-farm payrolls data later on Friday, as well as investor concern about whether the recent rush of upbeat indicators signals a true recovery or not.

"The macroeconomic indicators are all coming in pretty well, but it seems likely to be more a cyclical recovery than anything at this point, with good numbers over the next month or so but no real recovery just yet," said Nagayuki Yamagishi, a strategist with Mitsubishi UFJ Morgan Stanley Securities.

"Still, this is reassuring for the market, especially since so many of this week's U.S. indicators were expected to be bad."

Data from the National Association of Realtors showed pending U.S. home resales rose unexpectedly in July and a separate report showed new claims for unemployment insurance fell for a second straight week.

The figures came on the heels of strong U.S. manufacturing data on Wednesday that, along with good Chinese manufacturing data and stronger-than-expected growth in Australia, have eased, for now, investor fears about the strength of the global economic recovery.

Additional encouragement came after the European Central Bank on Thursday raised economic growth forecasts on the back of a strong second quarter.

But the upcoming jobs figures and a three-day weekend in the United States will mean many investors are likely to close out positions, market players said.

August non-farm payrolls are forecast to decline by 100,000. In July, they fell 131,000.

"Should the jobs data prove bad, this could lead to a further strengthening in the yen, which would definitely become a headwind for stocks," said Hiroichi Nishi, general manager of equities at Nikko Cordial Securities.

The benchmark Nikkei edged up 34.79 points to 9,097.63, while the broader Topix gained 0.4 percent to 822.50.

The next targets for the Nikkei will likely be around 9,280 and then 9,360, highs hit in late August, a market analyst said. The Nikkei's 25-day moving average currently comes in at 9,257.

If it resumes falling, the next technical level is 8,697, a 61.8 percent retracement of the rally from its March 2009 low to its April 2010 high.

Market players noted that the Nikkei's gains over the past few days have filled in a gap on the charts that opened on August 31. Its MACD has also turned upwards after a bullish cross, suggesting upward momentum and a possible short-term rebound.

"Of course everything depends on the jobs data, but I think it's safe to say that sentiment in the market seems to have changed this week, even though the Nikkei still hasn't risen that much," said Toshiyuki Kanayama, an analyst at Monex Inc.

EXPORTER GAINS

Exporters in general gained, although many were off earlier highs. Canon Inc rose 0.7 percent to 3,530 yen and Sony Corp gained 1.7 percent to 2,469 yen.

Sony announced at the IFA technology expo in Berlin it would expand its Qriocity video on demand service into five European countries this fall and add a new digital music service by year's end.

But Fast Retailing slipped 0.7 percent to 11,550 yen after it said same-store sales at its Uniqlo casual-clothing chain fell 9.3 percent in August from a year earlier, citing lacklustre sales of autumn items due to an unusually hot summer.

The stock was the biggest drag on the Nikkei 225 share average.

Nidec Corp lost 2.6 percent to 7,390 yen after announcing it would raise up to $1.2 billion in a convertible bond issue to fund acquisitions and investments, sparking worries over dilution to existing share value.

The bond, due in 2015 with a conversion price of 10,626 yen, could boost the number of shares outstanding by 6.49 percent, Nidec said. (Reporting by Elaine Lies; Editing by Edwina Gibbs)

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