Japan's Nikkei benchmark rose 1.6 percent to a nearly two-month closing high on Monday, powered higher by Honda Motor Co Ltd and other automakers on a weaker yen and hope that financial firms' woes have not spread to other sectors.
A growing sense that the worst of the credit crunch may be over helped boost financials such as top lender Mitsubishi UFJ Financial Group, while Komatsu Ltd surged after rival Caterpillar reported stronger-than-expected earnings. But Honda was the biggest driver of the Nikkei 225, hitting its greatest one-day percentage gain in roughly 6 months as it charged up by nearly 9 percent.
"The carmakers are rising on confidence about their markets - not the US so much necessarily, but emerging markets such as China and India," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities. "Honda didn't gain at quite the same speed as the others last week, so it's a bit stronger today. Of course, the softer yen is helping too."
The dollar was fetching roughly 103.87 yen edging towards a seven-week high after Citigroup's results fuelled hopes that the worst of the bank's losses from the US housing sector are out. Although the market was strong from the start on the back of a Wall Street rally on Friday, gains on that alone began to run out of steam late on Monday, with investors moving in to take profits.
Despite the growing optimism shown by a fifth successive day of gains for the Nikkei, market players remained wary. The benchmark Nikkei closed at 13,696.55, a gain of 220.10 points, hitting its highest close since February 28. Many players said a try of 14,000 was likely soon, although some investors were standing back until the Japanese results season gears up later this week and they can see how earnings pan out.
The broader TOPIX was up 2.1 percent at 1,331.51. Honda was the standout, with its gain of 8.8 percent to 3,330 yen its greatest one-day gain since October 26 last year, while other automakers and auto-related shares also powered higher. Toyota Motor Corp gained 5.1 percent to 5,370 yen, while Denso Corp, a top manufacturer of car electric parts, climbed 6.1 percent to 3,480 yen.
Nissan Motor Co Ltd gained 4 percent to 919 yen, while Suzuki Motor Corp rose 4.9 percent to 2,685 yen. Many financial firms also gained, with Mitsubishi UFJ Financial Group up 3.5 percent at 1,045 yen and No 3 bank Sumitomo Mitsui Financial Group up 3.5 percent at 797,000 yen. Nomura Holdings Inc, Japan's largest brokerage, gained 3.2 percent to 1,705 yen.
Blue chip exporters climbed across the board, with Canon Inc up 6.1 percent at 5,380 yen and Sony Corp up 5.7 percent at 4,640 yen. Hitachi Ltd gained 4.1 percent to 694 yen. Komatsu, the world's No 2 maker of earth-moving equipment, jumped 7 percent to 2,995 yen after bigger rival Caterpillar reported a rise in profit on strong international sales, boosting investor confidence in the sector.
Caterpillar reported a better-than-expected quarterly profit on Friday as strong international sales more than offset what the company characterised as a "recessionary storm in the United States". Trade picked up, with 1.86 billion shares changing hands, compared with last week's daily average of 1.68 billion. Advancing shares beat declining ones by more than two to one.
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