TOKYO: Japan's Nikkei average is expected to open lower on Friday, taking the index into bear market territory, as exporters are likely to take a beating after the yen firmed against the dollar on concerns that the key US jobs report will disappoint.
The Nikkei is likely to trade between 12,650 and 12,950, strategists said, while Nikkei futures in Chicago <0#NIY:> closed at 12,700 on Thursday, down 0.9 percent from the Osaka close of 12,820.
"The market will surely test the downside. Ahead of the payroll data, the only buyers will be those who need to cover short positions," said Masato Futoi, head of cash equity trading at Tokai Tokyo Securities.
"On the other hand, the decline has been so rapid that there are some signs the market is oversold. Both the Nikkei and the Topix is almost 10 percent below its 25-day moving average," he said.
"I would like to think that the Nikkei will stop falling at around 12,750, which represents a 20 percent decline from the peak hit in late May. There will be some buying around there and the market could rebound."
Economists in a Reuters survey forecast 170,000 new jobs added in the United States last month compared with 165,000 new jobs in April, while the unemployment rate is expected to remain at 7.5 percent.
Concerns of a potentially weak jobs outcome hit the dollar overnight. The yen gained 1.9 percent against the greenback on Thursday, and was last traded at 97.19 to the dollar on Friday
On Thursday, the Nikkei lost 0.9 percent to 12,904.02, breaking below 13,000 for the first time in two months, and the broader Topix index shed 1.8 percent to 1,070.77, even though the Bank of Japan bought 19.8 billion yen ($201 million) worth of exchange traded funds to support the market.
The market has had a torrid time over the past two weeks, with trading characterized by violent price moves and huge drops, as investors were spooked by worries over slowing growth in China, and uncertainty over whether the US Federal Reserve would roll back its stimulus this year.
The benchmark Nikkei has fallen 19 percent since hitting a 5-1/2 year peak on May 23, and investors will be looking at a bear market if the drop extends to 20 percent.
The index is up just over 4 percent since the BOJ's radical monetary expansion campaign was announced on April 4 and has risen 24 percent so far this year.
UBS said in a note that its client flow data showed net buying of Japanese stocks decelerated last month, mainly due to long-only accounts, although hedge fund clients ramped up net buying. -Reuters
Comments
Comments are closed.