The Nikkei share average rose on Friday, buoyed by European investors scooping up cyclical shares, but was capped by the top of the narrow range it has traded in for most of the week, with the majority of big players on the sidelines ahead of bank stress tests in Europe.
Home electronics retailers like Yamada Denki bolstered the market after a media report saying Japan will revive a programme to promote energy-efficient appliances as it looks to ease power shortages in the wake of the March 11 earthquake. Appetite for riskier assets was tentatively maintained after S&P futures shrugged off a warning from Standard & Poor's that there was at least a 50 percent chance it would downgrade its rating on US debt.
But traders were reluctant to make big bets ahead of the results of stress tests on European banks due later in the day, as well as before a long weekend in Japan. Investors were hedging against negative test results by shifting funds into defensive sectors such as pharmaceuticals and railways.
"The market is strongly supported by European and Asian investors. Europeans are now switching to autos and machinery, as Japan is poised to recover sharply after the quake," said Hideyuki Ishiguro, a supervisor at Okasan Securities. Banks shares were lacklustre ahead of the stress tests in Europe, failing to capitalise on the higher-than-expected profit reported by J.P. Morgan Chase & Co. "The combination of the upcoming three-day weekend, bank stress tests and earnings by bellwether US companies like Apple due next week are depressing volumes," Ishiguro said.
The benchmark Nikkei was up 0.4 percent at 9,974.47 after opening marginally lower. The Nikkei has spent most of the week trapped between resistance at 10,000 and immediate support at its 200-day moving average, around 9,901. The broader Topix added 0.3 percent to 859.36.
Trading volume was at a paltry 1.47 billion shares, the lowest in one and a half months and about 20 percent below last week's average of 1.83 billion shares. Strong earnings from Google Inc spurred profit-taking in recently outperforming internet stocks such as DeNA, down 2.6 percent at 3,920 yen, and Gree, which shed 2.5 percent to 1,860 yen. Both those stocks were among the most actively traded on the main board by turnover.
Hitachi rose 1.9 percent to 484 yen on news that an alliance it has formed with General Electric has moved a step closer to winning a commission to build a nuclear power plant in Lithuania.
Hitachi currently trades at a 46 percent discount to its peers based on its price to earnings ratio. Its PER stands at 9.3 while the average for its peers, including Toshiba and Fujitsu, is at 17.2. Fast Retailing fell 0.7 percent to 13,440 yen after posting its fifth straight drop in quarterly profit, with sales at its Uniqlo casual-clothing chain sagging following the quake and subsequent tsunami. CLSA cut its rating on the firm to "underperform" from "outperform", saying that sales were largely in line with the brokerage's estimate but that profit levels fell somewhat short due to weaker-than-expected domestic earnings at Uniqlo. Advancers outnumbered decliners by 916 to 595.
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