The Nikkei stock average pared much of its earlier gains to end up 0.2 percent on Wednesday after a report that Iran had test-fired missiles, raising fears about a jump in oil prices on heightened tensions in the region. The Japanese stock market sharply rose in the morning, led by financial shares such as Mitsubishi UFJ Financial Group after comments from the US Federal Reserve helped ease credit worries.
But the missile test news, which came in the afternoon, prompted many investors to lock in profits, with the Nikkei hovering near the previous day's close in the last half hour of trading. "The dollar had been strong and oil prices had been falling, but the missile firing will rekindle inflationary concerns," said Fumiyuki Nakanishi, group manager of the investment information department at SMBC Friend Securities. The benchmark Nikkei ended up 19.03 points at 13,052.13, after rising as much as to 13,284.65. The broader Topix was up 0.2 percent at 1,285.53.
Some market participants said the market reaction to the news shows investors had remained skittish even when the market was making a sharp rebound. "It shows the market still lacks strong buying power. There are few investors willing to take risks," said Masanobu Takahashi, chief strategist at Ichiyoshi Securities.
"There were good conditions lined up this morning for the market; oil price down, the dollar stronger, and machinery orders good," said Naoki Fujiwara, fund manager at Shinkin Asset Management.
Komatsu Ltd and other machinery stocks powered higher in the morning after Japan's May core machinery orders largely beat economists' consensus. But Komatsu, the world's No 2 maker of earth-moving equipment, ended 1.1 percent down at 2,725 yen. Electronics device maker Kyocera Corp also reversed earlier gains to fall 1.8 percent to 9,350 yen, the biggest drag on the Nikkei.
Iran has test fired nine long- and medium-range missiles, including one that it has previously said could travel as far as Israel and US bases in the region, state media reported. Mitsubishi UFJ Financial Group, Japan's biggest bank, rose 2.3 percent to 955 yen, while No 2 Mizuho Financial Group jumped 3.9 percent to 512,000 yen and Sumitomo Mitsui Financial Group the third-biggest bank, gained 3.2 percent to 796,000 yen.
Fed Chairman Ben Bernanke said in a speech the US central bank may extend emergency lending facilities for big Wall Street banks past the year-end, showing the Fed is determined to stop the housing-inspired credit crisis from wreaking further havoc on the economy.
Aeon Co Ltd fell 5.1 percent to 1,171 yen, becoming the biggest percentage loser on the Nikkei, after Japan's second-largest retailer posted a 20 percent decline in first quarter operating profit, hurt by weak clothing sales. Trade was moderate on the Tokyo exchange's first section, with 1.97 billion shares changing hands, in line with last week's daily average. Advancing stocks and declining ones were almost even at 793 to 781.
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