Nikkei adds 0.27%, but gains capped by political turmoil

10:58, June 02, 2011      

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A pedestrian walks past a stock market information screen in Tokyo, Japan, June 1, 2011. Tokyo stocks closed slightly higher Wednesday with the key Nikkei index climbing 0.27 percent. The benchmark Nikkei 225 Average advanced 25.88 points from Tuesday to 9,719.61. The broader Topix index expanded 0.93 point, or 0.11 percent, to 839.41. (Xinhua/Kenichiro Seki)

Tokyo stocks rose Wednesday, with the key Nikkei stock index gaining 0.27 percent, but gains were capped by concerns about the U.S. economy and political turmoil in Japan as the Cabinet of Prime Minister Naoto Kan faces a no-confidence motion.

Brokers said that disappointing economic data from the U.S. added to concerns about the health of the world's largest economy, led by a slide in home prices which slumped in March to their lowest level since 2003. Meanwhile consumer confidence in May hit an unexpected six month low and levels of regional factory output fell.

Also contributing to a circumspect market mood is the risk of a political vacuum in Japan as main opposition parties and members of Prime Minister Naoto Kan's own ruling Democratic Party of Japan (DPJ) support a no-confidence motion, the vote on which could come as early as Thursday.

"Even if the no-confidence motion is voted down, the Democratic Party of Japan could split, with some lawmakers leaving the party, " said Fumiyuki Nakanishi, general manager at SMBC Friend Securities Co.

"Investors' eyes are on the voting result, how many would leave the DPJ, and the aftermath and there seems to be some wariness in the market of a political vacuum," he added.

The 225-issue Nikkei Stock Average rose 25.88 points from Tuesday to 9,719.61, while the broader Topix index of all First Section issues on The Tokyo Stock Exchange gained 0.93 points, or 0.11 percent, to close at 839.41.

China-linked shares outperformed the broader market as concerns about monetary tightening receded following the Purchasing Managers Index (PMI) in May falling for a second month.

"The data seem to imply that the Chinese government will shift away from the kind of excessive tightening that the markets are worried about," said Tsuyoshi Segawa, an equity strategist at Mizuho Securities.

Komatsu gained 1.3 percent to 2,464 yen and Hitachi Construction Machinery rose 0.6 percent to 1,725 yen. Industrial robotics maker Fanuc added 1.4 percent to 12,670 yen.

Power companies were among notable decliners as Merrill Lynch cut its rating on Tokyo Electric Power Co. stating that its future was linked to politics.

"For now, the company and the government plan to maintain the utility's listing," the brokerage said in a report yesterday. " Depending on the future direction of politics, that may change."

Tokyo Electric plunged 5.7 percent to 299 yen and Chubu Electric fell 2.2 percent to 1,254 yen, following Merrill Lynch cutting its rating on the stock to "neutral" from "buy," after Chubu's U-turn on a share buyback plan.

Hokuriku Electric and Hokkaido Electric Power also retreated on ratings cuts on both firms to "underperform" from "neutral."

But Fast Retailing, operator of the Uniqlo chain of budget apparel stores, advanced after the company said it expected sales to leap as customers purchase lighter clothing in summer as the government will likely urge the country to use air-conditioning sparingly to save power.

Fast Retailing climbed 2.6 percent to close at 12,150 yen.

Trading volume on Wednesday dropped to 1.97 billion shares on the Tokyo Exchange's First Section, from Tuesday's volume of 2.29 billion shares, with advancing issues outnumbering declining ones by 882 to 630.

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Source: Xinhua
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