Nikkei bounces as yen rally pauses, Idemitsu Kosan tumbles

By: | Updated: June 29, 2016 9:24 AM

Japanese stocks rose on Wednesday morning thanks to a modest recovery in global equities following the Brexit rout, while a pause in yen buying also soothed market sentiment.

japan stocksBy mid morning, the benchmark Nikkei share average had climbed 1.4 per cent to 15,539.82. (Reuters)

Japanese stocks rose on Wednesday morning thanks to a modest recovery in global equities following the Brexit rout, while a pause in yen buying also soothed market sentiment.

By mid morning, the benchmark Nikkei share average had climbed 1.4 per cent to 15,539.82.

The early spotlight fell on Idemitsu Kosan Co on news that its founding family is opposed to the refiner’s planned takeover of smaller rival Showa Shell Sekiyu. Its shares tumbled more than 9 per cent after Kyodo reported on Wednesday that Idemitsu is considering issuing new shares to counter the founding family’s opposition.

The overall mood in the market was much calmer as the pound hovered above their post-Brexit lows, while the dollar also firmed to 102.63 yen, moving further away from its 2-1/2-year low of 99.00 touched on Friday after the outcome of the UK referendum.

Volatility eased as well, with the Nikkei Volatility Index dropping 9.4 per cent on the day, falling for a third day after spiking to more than a four-month high on Friday.

“What we are seeing is a technical rebound. We are still very cautious,” said Michiro Naito, executive director at equity derivatives at JPMorgan.

He said the British vote to leave the EU has stoked huge uncertainty over its implications to the global economy and it will likely weigh on risky assets for a while longer.

“There’s not much our government and central bank can do to counter the repercussions,” Naito said, noting concerns about the yen’s spike and the impact on Japanese exporters.

On Wednesday, Japanese Prime Minister Shinzo Abe on urged the central bank to provide ample funds to the market to ensure liquidity and the market’s intermediary functioning.

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