Tokyo stocks rally to 18-month closing high, commodities rise

20:04, March 30, 2010      

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Japan's Nikkei Stock Average advanced 1.01 percent on Tuesday to close above the psychologically important 11,000 line, as optimism about a global economic recovery and hopes for upbeat corporate profit reports, coupled with rising commodity prices, spurred buying.

The key benchmark Nikkei reversed Monday's losses adding 110. 67 points to 11,097.14, its highest close since October 2, 2008. The broader Topix index of all First Section issues on the Tokyo Stock Exchange gained 13.45 points, or 1.39 percent, to 979.58, the highest closing level since October 6, 2008.

Brokers said the broad rise of Tokyo stocks was due to strong hopes for a sustained global economic recovery and hopes that upcoming domestic corporate and U.S. earnings reports due out soon will be upbeat. Market players added that the bullish mood on Tuesday lifted investors' appetite for risk.

"The fog has started to clear, as the macro-economic environment improves globally. "Confidence in a V-shaped recovery in corporate earnings is getting stronger," said one Tokyo-based portfolio manager.

Analysts also said that data released this morning by the Ministry of Economy, Trade and Industry showing that Japan's industrial production fell a seasonally adjusted 0.9 percent in February from the previous month for the first decline in a year, did not dampen investor sentiment and similarly data released by Japan's Internal Affairs and Communications Ministry showing that the average Japanese monthly household spending fell a price- adjusted 0.5 percent in February from a year earlier, dipping for the first time in seven months, was not taken ominously as the real test for the market will come once corporate earnings season swings into full gear in early May.

''Japan and the United States, as well as emerging economies led by China, are on an economic recovery trend largely due to the impact of their respective economic stimulus measures,'' said Yukio Takahashi, a market analyst at Mizuho Securities Co.

''Once earnings reports are out by early May, investors may take a breather,''

The market did get a shot in the arm on Tuesday however from Japan's Ministry of Health, Labor and Welfare reporting that Japan's jobless rate in February held firm at 4.9 percent, leading some brokers to believe that the pace of Japan's economic recovery is likely to pick up, in line with other developed nations and thus the market is primed to rise further in the near future.

"Japan's economic recovery is not so far behind that of other developed nations, so Japanese stocks should rise even further," said Junichi Misawa, head of equity investment at Tokyo-based STB Asset Management Co.

Yesterday's terrorist strikes on Moscow's subway system had the potential to rock global markets as investor sentiment tends to be dashed by such incidents as fears mount that similar strikes could happen in other parts of the world, but the mood in Tokyo remained optimistic as the dollar rose against the yen and the London Metal Exchange Index of six metals including copper and zinc climbed 3 percent yesterday, the most since February 16.

Additionally, crude oil for May delivery jumped 2.7 percent to 82.17 U.S. dollars a barrel in New York, the biggest gain in more than five weeks, lifting some commodity-linked issues in Tokyo.

Kobe Steel Ltd. climbed 2.6 percent to 201 yen after raising its forecast for the financial year ending this month to a recurring profit of 5 billion yen (54.04 million U.S. dollars) from its previous forecast for a loss of 5 billion yen.

Pacific Metals Co. Ltd. edged up 0.52 percent to 766 yen and Toho Zinc Co. Ltd. climbed 2.21 percent to 463 yen.

Nonferrous smelter Dowa Holdings Co. Ltd added 3.1 percent to 569 yen after the Nikkei business daily said it was likely to post a pre-tax profit of roughly 13.5 billion yen (146.08 million U.S. dollars) for the financial year that ends this month, exceeding a previous forecast of 10 billion yen (108.21 million U.S. dollars).

Sumitomo Metal Mining Co. Ltd. gained 2.05 percent to 1,396 yen and steel producer Sumitomo Metal Industries Ltd. added 2.13 percent to close at 287 yen on Tuesday.

Trading house Mitsubishi Corp. leapt 3.9 percent to 2,462 yen, whilst fellow trader Mitsui and Co. Ltd. gained 2.36 percent to 1, 564 yen. Marubeni Corp. also involved in the import export and business advanced 1.75 percent to 581 yen.

A particular bright spot and biggest gainer on today's Nikkei was Nippon Light Metal Co. Ltd., an aluminum producer, who soared 5.34 percent to 138 yen.

Some 2.2 billion shares changed hands on the Tokyo exchange's first section, above Monday's volume of around 2 billion shares.

Advancing issues outnumbered declining ones by 1,359 to 212.

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