TOKYO, July 14 (Reuters) – Japan’s Nikkei surged nearly 3 percent on Wednesday, breaking above key resistance, with chip-related shares powering higher after Intel results beat expectations to ease fears about the U.S. economic recovery.
In active trade, the benchmark also got a boost from Komatsu (6301.T), which lifted its full-year forecast by 14 percent, citing better-than-expected first-half sales in Asia and Latin America, as well as a pick up in demand in Japan and the United States. [ID:nTOE66C04V]
Resilient demand for personal computers and servers helped Intel Corp’s (INTC.O) margin and revenue forecasts, out after the bell on Tuesday, blast past expectations, allaying fears of a possible tech spending slowdown and setting an upbeat tone for the industry’s earnings season. [ID:nN12197658]
The announcement came on the heels of better-than-expected quarterly earnings from Alcoa (AA.N) the day before, giving heart to investors who had fled to the sidelines on jitters about the economic recovery. [.N]
“There’s been growing doubts about the health of the U.S. economy, but these better-than-expected Intel results have really changed sentiment in the market,” said Toshiyuki Kanayama, a market analyst at Monex Inc.
“Wall Street rose strongly, there was Intel, and the yen is also weaker. A lot of good factors for stocks are now lining up.”
Some analysts said the Nikkei was playing catch-up with overseas markets after it dipped yesterday following the Alcoa results. By contrast, the FTSE 100 .FTSE rose 2 percent and the Nasdaq .IXIC 2 percent as well. The Dow gained 1.5 percent.
The benchmark Nikkei .N225 surged 2.7 percent, or 258.01 points, to 9,795.24, while the broader Topix gained 1.9 percent to 870.73.
Trade was active, with 2.3 billion shares changing hands on the Tokyo exchange’s first section, the heaviest volume in more than a month. Advancing shares outnumbered declining ones by more than 7 to 1.
Market players said short-covering emerged after the Nikkei broke above its 25-day moving average at around 9,960 and additional resistance on its daily Ichimoku charts at around 9,670, which was its kijun-sen.
The kijun-sen is an indicator of medium-term trends that can be either support or resistance but is currently pointing sideways, while Ichimoku charts are a popular charting method among Japanese traders.
In addition, the Nikkei’s MACD continued rising after a bullish cross.
But some in the market remained wary, noting that further rises could be hard to achieve.
“There’s selling of futures at around 9,800, and this is likely to cap gains for now,” said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities.
“Also, even though Intel may be good, there’s some concern about the bank earnings later this week, with good results for them necessary for the market to go much higher.”
JPMorgan Chase & Co (JPM.N) and Bank of America Corp (BAC.N) both announce this week.
An accumulation of long positions in the market, especially in blue-chip exporters, means that any further rises are likely to take time, Kanayama added.
The Nikkei’s next target is 10,000 and then around 10,250, the level of its June high.
Toyota Motor Corp (7203.T) and other carmakers surged, with Toyota up 4 percent to 3,250 yen and Honda Motor (7267.T) climbing 3.9 percent to 2,741 yen. Gains were seen as mainly due to a slightly weaker yen and the boost in overall sentiment.
Toyota said on Wednesday its investigation of nearly 2,000 cases of unintended acceleration had found no problem with its electronic throttle system, and that driver error was to blame in some cases. [ID:nTOE66D02P]
But Kuramochi said he thought the Toyota recall issue had largely faded as a factor for the market.
Chip gear manufacturer Tokyo Electron (8035.T) and other tech shares gained after the Intel results, with Tokyo Electron shares climbing 4.1 percent to 5,110 yen.
Chip-tester maker Advantest Corp (6857.T) shot up 5.7 percent to 2,013 yen, and Nikon (7731.T), a maker of steppers, advanced 2.1 percent to 1,644 yen.
Komatsu gained 5.4 percent to 1,790 yen.
Another high-powered performer was Mizuho Financial Group (8411.T), which rose 3 percent to 139 yen after the banking group set the price of its new shares for public offering on Tuesday. [ID:nTOE66C06H]
A strategist at a Japanese brokerage said short-covering is expected to continue supporting the stock in the near term, as speculators had shorted the shares ahead of the price-fixing, in anticipation of sell-offs by some investors who had hoped for a low price for the new stock. (Reporting by Elaine Lies; Editing by Joseph Radford)