Nikkei firm, robust earnings offset strong yen

TOKYO, (Reuters) - The Nikkei stock average rose on Tuesday as robust quarterly earnings and higher profit forecasts from the likes of digital camera and copier maker Canon Inc helped offset a yen that has strengthened on U.S. debt woes.

Japanese corporate results and smaller Wall Street losses than expected on the deadlocked debt talks encouraged short-covering with sporadic buying by Asian investors detected, market players said. The Nikkei, however, did not quite regain all the losses it made the previous day.

“Investors are confident that Japanese companies can generate profits even with current foreign exchange rates,” said a portfolio manager at a U.S. asset management firm, who declined to be quoted by name.

“If the dollar stays near 80 yen, there probably won’t be a big sell-off,” he said.

The benchmark Nikkei rose 0.5 percent at 10,097.72

and the broader Topix index also gained 0.5 percent, to 866.20.

The Nikkei is not that far from a four-month intraday high of 10,207.91 hit this month, a break of which could open the way for a return to pre-quake levels a bit above 10,250 -- although many don’t expect that break just yet.

Worries about a deadlock in talks to raise the U.S. debt ceiling are making investors increasingly nervous, although most expect lawmakers to clinch a deal before the Aug. 2 deadline.

Those worries have driven the yen towards a record high against the dollar, denting optimism that manufacturers, whose exports are undermined by a strong Japanese currency, will continue to recover steadily from the damage caused by the March 11 earthquake.