Asian Market News

Wednesday December 3, 02:55 AM
Nikkei pares gains as optimism wars with yen

By Elaine Lies TOKYO, Dec 3 (Reuters) - Japan's Nikkei (news) average pared gains to 1 percent on Wednesday, with optimism after a Wall Street rally fading as the dollar briefly flirted with the 92-yen level, weighing on exporters such as Sony Corp (Munich: 853687 - news) . Automakers suffered, with Honda Motor Co (Stuttgart: 853226 - news) down 5.5 percent in the face of a sharp drop in U.S. sales and a report by the Nikkei business daily that it is scaling back its overseas expansion plans. Chip equipment makers also struggled. But defensive shares bucked the downward pressure, with drugmakers and communications firms gaining as investors turned to shares seen more resilient in the face of global economic uncertainty. 'It's all the currency -- and the Bank of Japan doesn't seem to have much of a sense of danger compared to other central banks,' said Tomomi Yamashita, a fund manager at Shinkin Asset Management. 'Aside from the currency, there really isn't all that much to worry about right now, and the U.S. could well recover. But because of the strong yen, Japan risks being left behind.' The dollar had clawed up to 93.21 by midday after briefly dipping into the 92-yen level, dampening the Nikkei's early bounce. A strong yen dents profits when repatriated. But other market players were guardedly optimistic, pointing to the rebound on Wall Street and encouraging moves concerning the U.S. Big Three automakers. U.S. stocks rebounded on optimism after global bellwether General Electric (NYSE: GE - news) pledged to leave its dividend intact, while financial shares gained on a Federal Reserve move to extend several emergency measures integral to stabilising banks. Additional encouragement came after U.S. automakers submitted survival plans and a top lawmaker predicted Washington would approve a bailout, saying that bankruptcy was not an option. 'Expectations for a Big Three bailout boosted Wall Street, and with Citigroup (NYSE: C - news) also basically taken care of, the safety net appears to have been spread,' said Takashi Ushio, head of the investment strategy division at Marusan Securities. 'Of course all the worries haven't been completely erased, but it appears as well that markets have become more resilient in the face of bad news than they were a few months ago.' The benchmark Nikkei gained 77.29 points to 7,940.98 after earlier rising as far as 8,042.18, a day after tumbling 6.4 percent to a nearly two-week low. The broader Topix gained 0.8 percent to 793 yen. GOOD NEWS, BAD NEWS The optimism was underlined by the fact that orders placed through 12 foreign brokerages prior to the start of trade showed that foreign brokers were set to buy Japanese shares, albeit by a slim margin, for only the second time in nearly a month. But bad news still took a toll on several sectors. Honda fell 5.5 percent to 1,782 yen and Toyota Motor (Frankfurt: 853510 - news) was down 1.8 percent at 2,775 yen, after U.S. monthly auto sales in November plunged 37 percent to the lowest level since 1982, data showed on Tuesday. U.S. sales for Toyota dropped 34 percent, Honda fell 32 percent, Ford Motor Co was off 31 percent, Nissan Motor Co (Berlin: NISA.BE - news) tumbled 42.2 percent and Chrysler LLC sales fell 47 percent. Chip equipment makers fell after industry association SEMI said on Tuesday that global sales of semiconductor equipment are expected to fall 28 percent to $30.9 billion this year as deteriorating world economies prolong a slump in the chip sector. Tokyo Electron (Stuttgart: 865510 - news) lost 0.9 percent to 2,340 yen and TDK Corp shed 1.1 percent to 2,785 yen. Advantest Corp (Berlin: VAN.BE - news) lost 0.7 percent to 1,093 yen. But defensive buying by investors lifted drugmaker Eisai Co (Frankfurt: 855526 - news) Ltd, which rose 3 percent to 3,140 yen, and fellow pharmaceutical firm Astellas Pharma Inc (Berlin: YPH.BE - news) , which rose 1.6 percent to 3,790 yen. Some retailers also did well. Shares of Fast Retailing Co Ltd (Frankfurt: 891638 - news) were untraded due to a glut of buy orders at 10,790 yen, up 10.2 percent from Tuesday's close, after it said November same-store sales at its domestic Uniqlo casual clothing chain jumped 32.2 percent from the same month a year earlier, marking the biggest monthly gain since March 2001. Trade edged up, with some 784 million shares changing hands on the Tokyo exchange's first section compared with last week's morning average of 779 million shares. Advancing shares outnumbered declining shares, 970 to 598. (Reporting by Elaine Lies; Editing by Chris Gallagher)