Reuters: Financial Services and Real Estate: Nikkei extends recovery on optimism over euro zone, U.S. action

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Nikkei extends recovery on optimism over euro zone, U.S. action Jun 7th 2012, 03:15 Wed Jun 6, 2012 11:15pm EDT * Hint of more Fed easing, euro zone policy response * Riskier assets sought; steel, mining up * Securities sector boosted 3.5 percent, Nomura rises more * Chipmakers spurred on by U.S. chipmaker index gains By Sophie Knight TOKYO, June 7 (Reuters) - Japan's Nikkei average rose on Thursday morning as sentiment was boosted by speculation that euro zone leaders will act to curb the spread of the region's debt crisis and bank woes. Hints that the U.S. Federal Reserve could take action to tackle the sluggish domestic jobs market and a worsening euro zone crisis added to the investor optimism. The Nikkei added 1.3 percent to 8,641.31 , above its 14-day moving average of around 8,555 and o n track for its third straight day of gains, as increased demand for securities, steel and shipping companies signaled risk aversion may be abating. "People may just be starting to think it's okay to be long again," said Hisao Matsuura, equity strategist at Nomura. "When these sectors rose last year they preceded a recovery." The securities sector rose 3.5 percent, shipping gained 2 percent and mining climbed 2.7 percent. Chipmakers benefited from a 3.4 gain in the PHLX semiconductor index overnight. Toshiba Corp was up 3.4 percent, Tokyo Electron Ltd rose 2.2 p e rcent and Advantest Corp added 2.9 pe r cent. Short-covering emerged following big U.S. gains overnight, with the S&P 500 marking its biggest one-day rise since December, after the European Central Bank increased pressure on the region's leaders to resolve the euro zone debt crisis. "Sentiment has largely improved because they seemed to say that the market has underestimated the political will of European leaders and that we can expect more," said Masayuki Doshida, a senior market analyst at Rakuten Securities. Germany and EU officials are also exploring ways to throw a lifeline to Spain's ailing banks, although Madrid has not yet officially asked for assistance and has refused a conditional bailout, according to European sources. Risk sentiment was also given a lift after Federal Reserve Vice Chair Janet Yellen argued the Fed could increase its bond purchases or postpone an interest rate hike to stimulate the stumbling U.S. economy. BOOST FROM WEAKENING YEN The broader Topix index put on 1.4 percent to 728.76, moving farther from the 28-year low it hit on Monday after breaking through the 700-level. Exporters were granted a breather by the weakening yen, as the dollar was at 79.34 yen and the euro tiptoed back up to 99.68 yen. Major auto exporters Honda Motor Co Ltd, Toyota Motor Corp and Nissan Motor Co Ltd climbed between 1.7 and 1.9 percent, slightly outperforming the market. "Expectations of more easing are sustaining the rebound," said Fumiyuki Nakanishi, general manager of investment and research at SMBC Friend Securities. "It's still driven by short-covering but a softer yen should help." The expiration of a slew of stock options on Friday, known as an "options SQ" in Japan, will lead to a spike in options volumes on Thursday and Friday, Nakanishi added. "Investors are eyeing strike prices between 8,500 and 8,750 for Friday's close, so it could end up at 8,650 by then," he said. The Nikkei is now up 2.4 percent on the week. If it manages to hold onto its gains by the close on Friday it will snap a nine-week losing streak, its worst in 20 years. Worries about a stuttering U.S. economy, slowing growth in China and an escalating euro zone crisis have conspired to knock the Nikkei down 16 percent from the one-year high it hit on March 27. Link this Share this Digg this Email Reprints

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