Stocks scored handsome gains Monday, buoyed by buying on dips and buybacks on a wide range of issues after sell-offs last week, with the Nikkei average closing above 13,000 for the first time in three sessions.
The Nikkei 225 closed 346.60 points, or 2.73 percent, higher at the day’s pinnacle of 13,033.12. On Friday, the key market gauge surged 241.14 points.
The Topix climbed 28.27 points, or 2.68 percent, to end at 1,084.72 after rising 12.28 points Friday.
The market kicked off the week with losses after New York equities fell back late last week on profit-taking.
After the initial selling ran its course, however, the key indexes popped up into positive territory on buybacks and buying on dips.
The Nikkei accelerated its upswing in the afternoon, led by rises in heavily weighted component issues, such as mobile carrier Softbank and clothing retailer Fast Retailing, due to a halt in the yen’s strengthening.
The benchmark index moved in a narrow range around the 13,000 line for the rest of the afternoon session, caught in a tug of war between buying on dips of undervalued issues and selling on a rally, brokers said.
Investor sentiment was also shored up by brisk performances of Asian equities, brokers said.
But a wait-and-see mood grew in the afternoon with investors waiting for the results of the U.S. Federal Reserve’s two-day Federal Open Market Committee meeting, which starts Tuesday, and the inevitable news conference by Fed Chairman Ben Bernanke after the meeting ends Wednesday, brokers said.
Last week, many players were worried the U.S. central bank was getting ready to end its quantitative easing regime.
Nonetheless, “such worry has been receding as U.S. economic indicators released late last week were disappointing,” said Hiroichi Nishi, equity general manager at SMBC Nikko Securities Inc.
The Nikkei is unlikely to slip deep below 12,500 as several technical charts suggest that a number of issues are undervalued, a brokerage official said.
JGBs drift lower
Japanese government bonds lost ground Monday, pressured by the rise in stocks.
In late interdealer trading in cash JGBs, the yield on the latest 329th 10-year issue with a 0.8 percent coupon stood at 0.840 percent, up from 0.815 percent late Friday.
The lead September contract on 10-year JGBs closed down 0.09 point from Friday at 142.71. Volume fell to 21,184 contracts from 28,862.
JGBs got off to a firmer start following a rise in U.S. Treasury securities late last week but quickly reversed course on the rise in Tokyo stocks.
JGBs also came under pressure from disappointment that the Bank of Japan’s JGB purchases Monday did not include bonds with remaining maturity periods of over five years to 10 years, an official at a bank-affiliated securities firm said.
Early this week, JGBs are expected to attract buying on dips when the 10-year yield rises above 0.85 percent and be hit by selling when it falls below that level, the official said.
Players are paying keen attention to a two-day policy meeting of the U.S. Federal Reserve set to end Wednesday and the Finance Ministry’s auction of new 20-year JGBs scheduled for Tuesday.