Japan’s stock market is struggling to build on recent gains as investors remain jittery over fears that the Japanese economy still faces major challenges in the aftermath of the devastating March 11 earthquake and tsunami.
REUTERS - Japan's Nikkei stock average nudged higher on Monday but struggled to extend gains as uncertainty over Japan's economic outlook and a prolonged nuclear safety crisis curbed enthusiasm on a weaker yen and a rise in U.S. shares after strong payrolls data.
The Nikkei peaked at a session high of 9,808.60, lifted by blue-chip exporters, but shied away from a two-week high of 9,822.06 hit on Friday and its 200-day moving average also seen near Friday's high.
Although it has recovered more than two-thirds of the ground lost during its steep tumble in the aftermath of a massive earthquake and tsunami on March 11, the Nikkei remains nearly 7 percent below its pre-quake levels and those who thought the market would keep rising smoothly may be in for a bitter surprise, players said.
"The Nikkei is up mainly because of gains in global shares, but if you look at domestic factors, there are still plenty of uncertainties," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley Securities.
The Japanese government warned on Sunday that it could take months to stop radiation leaking from the plant.
"The fact that the Nikkei can't hold above 9,800 shows investor caution towards the outlook for the Japanese economy," Yamagishi said.
Big Japanese manufacturers expect business conditions to worsen in the next three months, responses to a BOJ survey collected after the devastating quake showed.
The benchmark index closed up 0.1 percent at 9,718.89, with small-cap reconstruction-related shares and smelters outperforming the market on expectations for a pick up in demand, while the broader Topix shed 0.3 percent to 859.75.
Iwatani, a trading company specialising in gases for industrial and household use, surged 7.6 percent to 296 yen after the Nikkei business daily said it was running production lines for portable gas cooking stoves and gas canisters at full capacity to meet a post-earthquake surge in demand.
SUPPLY CHAIN WORRIES
Japanese export-led stocks may not have benefited fully from the yen's recent weakness on views some manufacturers may face trouble restoring production to full capacity due to possible disruption to domestic supply chains as well the impact of
potential power shortages, analysts said.
Underlying worries about bottlenecks, Sony Corp slipped 1.2 percent to 2,640 yen after Goldman Sachs downgraded the electronics maker to "neutral" from "buy" citing over dependence on external suppliers for chipsets and lenses used in its TVs and digital cameras.
Despite a fairly healthy rebound after the quake, analysts said the Nikkei will likely come under selling pressure in May, when companies report their first quarter earnings.
"Many firms have already delayed their earnings announcements and some won't be able to publish forecasts, so the market will probably get very jittery," said Fumiyuki
Nakanishi, group manager at SMBC Friend Securities.
Nakanishi added that the slump may be unpredictable because investors won't be able to accurately gauge how to price in the risks caused by damage to corporate performance after the quake.
Shares of electric machinery maker IHI Corp jumped 4 percent to 210 yen in heavy trade after the Nikkei business daily said IHI and Sweden's Atlas Copco will soon sign a memorandum of understanding to partner on the marketing
of industrial-use compressors.
U.S. employment grew solidly for a second month in March and the jobless rate hit a two-year low of 8.8 percent, spurring solid gains on Wall Street and boosting hopes for the global economy to remain on track for sustainable recovery.
Shares in Tokyo Electric Power dropped 1.6 percent to 442 yen, weighed down by uncertainty over the situation at its crippled Daiichi Fukushima nuclear power plant.
Date created : 2011-04-04