December 26, 2018 / 3:36 AM / 21 days ago

Nikkei grapples in bear market territory after rout

* Nikkei gains 0.5 pct by break after previous day’s 5 pct drop

* Benchmark index helped by short covering

* Toyota, Sony, Keyence rise; Fast Retailing, SoftBank fall

By Daniel Leussink

TOKYO, Dec 26 (Reuters) - Japan’s Nikkei rebounded slightly on Wednesday, helped by short-covering, but struggled to stay afloat after plummeting into bear market territory the previous day.

The Nikkei share average rose 0.45 percent to finish the morning session at 19,241.87, barely shaking off the 5.01 plunge of the previous session - the steepest single-day decline in over two years.

The searing sell-off has left the benchmark down about 21 percent from a 27-year peak scaled in early October, meaning it’s still in bear market territory entered during the previous session.

The broader Topix was 0.88 percent higher at 1,427.94, but down 25.5 percent from a high of 1,911.31 hit in late January.

The stock market woes weren’t confined to Japan. Wall Street had a torrid day on Christmas eve, leaving global equity markets heading into the year-end under a heavy cloud as concerns over world growth and U.S. political uncertainty jangled investor nerves.

A U.S. federal government shutdown and President Donald Trump’s increasingly hostile stance towards the Federal Reserve Chairman, Jerome Powell, kept investors well clear of riskier assets.

“For short-term sentiment to improve, it’s necessary for Democrats and Republicans to agree on the budget so that the government shutdown will be lifted,” said Yutaka Miura, chief technical analyst at Mizuho Securities.

“I think there is a possibility selling (in Japanese stocks) will resume after rebounding once because the uncertainty hasn’t been resolved completely yet.”

The Nikkei was helped by short covering, Miura said.

Shares of some index heavyweights rebounded on Wednesday, with Toyota Motor Co rising 0.4 percent, Sony Corp and Nintendo both adding 1.5 percent, and factory automation maker Keyence up 1.8 percent.

Other index heavyweights fell, however, with Fast Retailing down 0.8 percent and SoftBank Group giving up 1.4 percent.

Exporters got a small boost as the yen moved somewhat off a four-month high against the dollar reached overnight after Japan’s top currency official said Tokyo stands ready to take necessary steps if the market becomes too erratic.

Electronics manufacturer Panasonic gained 1.7 percent while construction machinery maker Komatsu advanced 0.8 percent and factory robot maker Fanuc Ltd tacked on 1.1 percent.

All but four of the Tokyo Stock Exchange’s 33 subsectors were in positive territory, led by precision machinery and air transport.

Reporting by Daniel Leussink Editing by Shri Navaratnam

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