Nikkei up nearly 3%, books best week in year

Monday, 8 November 2010 04:26 - - {{hitsCtrl.values.hits}}

Tokyo (Reuters): Japan’s Nikkei average jumped 2.9 percent on Friday and booked its best week in a year, after the Federal Reserve’s plans to buy more Treasuries prompted investors to seek risk elsewhere, prompting rallies in global stocks and commodities.

Short-covering of futures by foreign investors and advances for resource shares were behind the climb, analysts said. The Nikkei .N225 rose 4.6 percent on the week.

Amid broad-based gains, Nissan Motor Co jumped 6 percent after bumping up annual guidance past market forecasts, but Resona Holdings plunged after sources told Reuters the bank plans to raise about $6.2 billion in a share issue.

Despite this week’s gains, Tokyo has lagged behind other stock markets, and the Nikkei has shed 8.7 percent so far this year hit by worries about the impact of the strong yen on corporate earnings and a fragile economic recovery.

In contrast, U.S. stocks have surged back to levels last seen before Lehman Brothers’ collapse in 2008, with the Nasdaq .IXIC gaining about 14 percent this year, while the MSCI index of Asia Pacific stocks outside Japan is up 16 percent.

“What we saw here today is short-covering, and a rebound of this magnitude is within expectations, given the market’s recent poor performance. The question now is whether the Nikkei will keep moving higher, whether it can climb above 10,000,” said Masaru Hamasaki, senior strategist at Toyota Asset Management.

“As the yen’s strength against the dollar hasn’t been really corrected and worries about its impact on earnings remain, the market will probably become range-bound after the rebound runs its course.”

The benchmark Nikkei gained 267.21 points to 9,625.99, its highest close since Oct. 7 and its best daily performance since early June.

The broader Topix added 2.3 percent to 834.98, after booking its lowest finish in 19 months at 803.12 on Tuesday.

Analysts expect next targets for the Nikkei to stand around 9,700, a high hit last month, and then around 9,800, a July peak.

“Foreign investors appear to be picking up shares of companies that are sensitive to economic cycles such as trading houses after rallies in oil and gold,” said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities.

In Asian trade the dollar fetched 80.80 yen JPY=, not far from its all-time low of 79.95 yen.