Tokyo stocks up

Japanese stocks ended up on Tuesday after a day of volatile trade that saw the benchmark Nikkei cover a 510-point range, with moves both up and down led by banking shares such as Mizuho Financial Group
An earlier surge of short-covering that took both the Nikkei and the broader TOPIX index into positive territory in a matter of minutes was sparked by news that Citigroup has reached a deal to sell a $7.5 billion stake in itself to the Abu Dhabi Investment Authority. The sale is seen providing a shot of funds to the biggest US bank, which has been one of the hardest hit by subprime mortgage defaults and resulting credit crunch.
The dollar soared, rising above 108 yen, and stocks, led by financial firms, followed. Exporters also got a boost. But shares in Citigroup, which is also listed in Japan, fell 4.2 percent to 3,450 yen after initially turning positive on the news.
Citi shares listed on TSE had the largest trading volume since its debut on the bourse on November 5, with 41,700 shares changing hands, far beyond the previous record of 16,650 shares on November 7. A similar Nikkei bounce took place on Monday on a report that a Chinese fund was planning to buy Japanese stocks. The fund later said it had yet to make a decision on where to invest.
"What has basically happened is that short positions have piled up in the market and investors rushed to cover them," said Takahiko Murai, general manager of equities at Nozomi Securities. "What we're seeing is a lot of short-term money out there, nothing that marks the start of a real rebound."
Japanese market opinion was divided on what the Citigroup news might mean. "The news gave a sense of relief to investors and they thought it was time to go bottom fishing," said Tsuyoshi Nomaguchi, a strategist on Japanese equity research at Daiwa Securities Co Ltd.
The Nikkei closed up 0.58 percent at 15,222.85, a rise of 87.64 points, after moving between 14,801.87 to 15,312.55 during the day. The broader TOPIX index was up by 0.8 percent at 1,478.78. Others said that while it did appear that the scope of the problem might finally be starting to become clear, resolving it and the economic fallout it may bring was another matter.
"Everyone knows that the whole subprime issue is serious, but we still don't know how it'll affect the US economy, how much of a slowdown we might see," said Nozomi's Murai. "The Nikkei may stop falling, but with Japan's economy perhaps slowing as well, there's no real reason to buy."
Following the cue of Monday Wall Street trade, where a tumble was led by financial shares centred largely around Citigroup, banks led stocks down from the opening, with both the Nikkei and TOPIX falling by over 2 percent.
But the Citi news, which emerged just after the start of afternoon trade, sent the market shooting higher. Mitsubishi UFJ Financial Group was up by 3.9 percent at 1,030 yen, while Sumitomo Mitsui Financial Group rose 3.8 percent to 902,000 yen. Mizuho Financial Group was up 2.9 percent at 567,000 yen.
Japan's Norinchukin Bank, the unlisted main bank for Japan's agricultural co-operatives, said it would post 38.4 billion yen ($357 million) in losses linked to the US subprime mortgage loan crisis for the April-September first half. Trade picked up, with 2.3 billion shares changing hands, on a par with last week's daily average. Advancing shares outnumbered declining ones by more than two to one.