Nikkei rebounds from 1-week closing low on US fiscal hopes

Thu Nov 29, 2012 1:00am GMT

* U.S. optimism of budget deal lifts sentiment
    * Exporters rebound after setback
    * Yen bought, but seen weaker ahead of election

    By Dominic Lau
    TOKYO, Nov 29 (Reuters) - Japan's Nikkei average rebound on
Thursday from the previous session's one-week closing low as
investors took comfort from comments by the top Republican in
the U.S. Congress that he was optimistic about reaching a budget
deal with the White House.
    The Nikkei rose 0.5 percent to 9,356.54, facing
resistance at its five-day moving average at 9,368.72.
    U.S. House of Representatives Speaker John Boehner on
Wednesday voiced optimism that a deal could be reached to avoid
a "fiscal cliff" of $600 billion in spending cuts and tax hikes
starting in the new year. Failure to reach a deal could see the
U.S. economy back in recession and drag down the global economy.
    Boehner's comments boosted U.S. and Europe stocks overnight.
    Japan's exporters gained ground on Thursday, after a bout of
profit-taking following a recent rally spurred by a weaker yen.
The yen has been under pressure on expectations Japan's main
opposition party will win a Dec. 16 election and increase
pressure on the central bank to adopt a bolder monetary policy.
    "The yen is back safely to the 82 handle (to the dollar).
Yesterday was a bit of a consolidation day. People are happy to
come in today and do a little bit of buying again," a senior
dealer at foreign brokerage said.
    "We are going to be in a grace period until the election.
Until then, people are prepared to buy into the idea that the
yen is going to weaken further."
    Calls by Shinzo Abe, leader of the main opposition party
Liberal Democratic Party, for the Bank of Japan to set an
inflation target of 2 percent and embark on "unlimited easing"
have weakened the yen sharply over the past two weeks, giving
shares of long-suffering exporters a fillip.
    
    Exporters in demand on Thursday included Toyota Motor Corp
, Canon Inc, Nissan Motor Co and
Hitachi Ltd, up between 1.2 and 2 percent.
    JFE Holdings climbed 2.2 percent after the Nikkei
business daily said the steelmaker is expected to generate
positive free cash flow of about 100 billion yen ($1.2 billion)
this fiscal year, due to lower costs, smaller inventories and
lower capital expenditures.
    But Nakayama Steel Works Ltd slumped 10 percent
after the same newspaper said the electric furnace steelmaker
will seek waivers on some 60 billion yen ($733.27 million) of
debts from more than 40 banks, as it seeks a credit-led
turnaround of its business. 
    The broader Topix gained 0.7 percent to 776.94.
    The benchmark Nikkei has rallied 8 percent over the past two
weeks, taking the month-to-date gain to 4.9 percent, on track
for its best monthly performance since June.
    The Nikkei is up 10.7 percent so far this year, trailing a
12.1 percent rise in the U.S. S&P 500 and an 11.7 percent
gain in the pan-European STOXX Europe 600.
    Still, Japanese equities are more expensive than their
European counterparts, with a 12-month forward price-to-earnings
of 12 versus STOXX Europe 600's 11, data from Thomson Reuters
Datastream showed. The S&P 500 has a 12-month forward P/E of
12.5.
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