Nikkei bounces slightly, but sentiment fragile as Fed worries weigh
Japanese stocks edged higher in choppy trade on Wednesday after the sharp losses on the previous day, but the upside was limited by lingering concerns about a rate hike in the United States later this year.
The Nikkei share average rose 0.3 percent to 20,152.72 after falling 1.8 percent on Tuesday, its biggest loss in almost a month. Some of the previous day’s big losers attracted buyers, with Honda Motor Co adding 1.1 percent and Fuji Heavy Industries Ltd gaining 1.4 percent. But traders said that market sentiment was fragile, partly shaken by higher global bond yields and expectations of a rate rise by the U.S. Federal Reserve before year-end.
“Money is fleeing from advanced markets (which have risen recently) including Japan, the U.S. and Europe, so more selling is possible,” said Eiji Kinouchi, chief technical analyst at Daiwa Securities. He said that volatility may persist for a few more weeks when markets including Japan and the U.S. have futures and option settlements. During the settlement term, traders try to profit from the volatility in the underlying stocks.
Nintendo Co gained 1.4 percent after Bank Of America Merrill Lynch hiked its rating to ‘neutral’ from ‘underperform’, citing expectations that its smart phone business will likely grow from the year ending March 2017 and beyond. On the other hand, Isuzu Motors Ltd dropped 1.6 percent and Hino Motors Ltd tumbled 3.5 percent after Citigroup cut the truck makers’ ratings to ‘neutral’ from ‘buy’, citing weak demand in southeast Asia.
Strong machinery data didn’t have much of an impact on the market. Japan’s core machinery orders unexpectedly rose in April at the fastest pace in four months, in a sign companies are turning more optimistic about business investment as domestic demand strengthens. The broader Topix gained 0.4 percent to 1,640.14 and the JPX-Nikkei Index 400 added 0.3 percent to 14,808.55.