Aided by buying on dips, the Nikkei 225 average rose Monday, but its topside was heavy due to persistent profit-taking pressure.
The Nikkei ended 19.86 points higher at 15,369.28 after sagging 11.74 points Friday. But the broader Topix lost 1.44 points to close at 1,267.48 after finishing last week with a loss of 0.12 point.
The Nikkei kicked off the week with a modest gain after the U.S. Dow Jones industrial average extended its winning streak Friday to a sixth session and rewrote its closing high.
After the initial buying ran its course, however, the market came under profit-taking pressure that was built on a strong sense of overheating.
Stocks jumped in the midmorning, fueled by the news that HSBC China manufacturing purchasing manager’s index for June topped the boom-or-bust threshold of 50 percent to reached a seven-month high.
But the buying proved short-lived as stocks were hit by renewed selling to cash in gains. The Nikkei managed to end in positive territory thanks to buying on dips, but the Topix failed to recover.
The yen’s advance, particularly against the dollar, reinvigorated profit-taking activities in the afternoon, brokers said, pointing out that technical charts were indicating overheating.
Among such indicators, the ratio of rising issues to falling ones in the first section had risen as high as 151.6 on Friday, analysts said.
Still, players have shown no sign of increased selling amid brightening economic outlooks for other countries, including the United States and China, brokers said.
“Though Japanese investors prefer sitting on the fence or selling to lock in profits, foreigners seem willing to buy on dips,” said Ryuta Otsuka, a strategist at Toyo Securities Co. “I think the Nikkei can touch 15,500 this week.”
Winners outnumbered losers 929 to 715 in the first section, while 171 issues were unchanged. Volume sank to 1.960 billion shares from Friday’s 2.950 billion.
JGB futures move lower
A key Japanese government bond futures contract weakened Monday as stocks firmed before cutting their earlier gains.
The lead September contract on 10-year JGBs closed down 0.05 point from Friday to 145.38. Volume rose to 22,029 contracts from 15,128.
In late interdealer trading in cash JGBs, the yield on the latest 334th 10-year issue with a 0.6 percent coupon stood at 0.580 percent, unchanged from Friday.
The key futures contract was weaker as trading lacked direction in the morning. As stocks trimmed gains in the afternoon, selling was limited.