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Nikkei posts strong rebound thanks to weakness in the yen

by Jgbs Lack Direction

JIJI

Stocks bounced back Monday after a sharp drop Friday as the yen eased against major counterparts.

The Nikkei 225 average surged 307.85 points, or 2.19 percent, to end at 14,396.04. On Friday, the key market gauge plunged 398.22 points.

The Topix closed 20.08 points higher at 1,198.36 after shedding 25.07 points Friday.

The TSE kicked off the week up more than 170 points after Wall Street advanced late last week. The Dow Jones industrial average rose to a one-month high on Friday following better than expected data on durable goods orders for September.

Investors also took heart from the yen’s easing against other currencies, brokers said.

These factors allowed the Nikkei to recoup most of Friday’s hefty losses.

The Nikkei gained further ground in the afternoon thanks to futures-led buying, brokers said.

The dollar may have hit bottom against the yen for now and start gaining strength to underpin Japanese stocks, an official at a bank-affiliated brokerage firm said.

Still, the picture for the equity market is far from rosy as the yen is unlikely to drop significantly against the dollar if the Federal Reserve keeps its asset purchase program in place for a longer period than expected, the official added.

Meanwhile, half-year corporate earnings are beginning to hit the TSE, along with much-anticipated changes in their earnings estimates for the full year to March.

“Earnings reports will reveal the strength of individual companies’ core business performances apart from the positive impact a weaker yen has on their balance sheets,” said Yoshihiko Tabei, chief analyst at Kazaka Securities Co.

There are fears that a slowdown in the yen’s depreciation against the dollar, which hit as high as ¥100 in September, may erode the positive foreign exchange effect, Tabei said, adding that unless there are positive surprises in earnings reports, the market will not chase higher ground in the near term.

Rising issues outnumbered falling ones 1,431 to 253 in the first section, while 73 issues were unchanged.

Stocks rose across the board, with all of the 33 first-section sector subindexes posting gains.

Sony rocketed more than 3 percent, along with other electronics firms, including Hitachi and Sharp.

Toyota and Honda rebounded thanks to the yen’s fall, which also supported other export-oriented names such as industrial robot maker Fanuc and electronic devices maker Kyocera.

Online portal site operator Yahoo Japan extended losses.

Japanese government bonds moved little in quiet trading Monday.

The lead December contract on 10-year JGBs closed unchanged from Friday at 144.83. Volume shrank to 8,386 contracts from 20,988.

In late interdealer trading in cash JGBs, the yield on the latest 330th 10-year issue with a 0.8 percent coupon stood at 0.615 percent, up from 0.610 percent late Friday.

The bond market almost ignored a sharp rebound in the Nikkei average, which ended more than 300 points higher.