Nikkei advances

Japan's Nikkei average rose for a third day on Wednesday on fresh hopes of further stimulus from central banks, but pared gains after brushing close to the psychologically key 9,000 level ahead of Friday's options settlement. Struggling TV maker Sharp Corp limped up 2.7 percent after taking a bruising last week, having lost 28 percent on Friday alone after revising its full-year guidance to reflect a massive operating loss.
---- Trading volume on Topix hits 2-month high
Early trading was brisk and "risk-on" after a top Fed official appeared to support more US stimulus, which strengthened the dollar and yen against the yen to award a further fillip to Japanese exporters. The Nikkei closed up 0.9 percent to 8,881.16, managing to break above its 75-day moving average. However, it retreated from its 200-day moving average of 8,955.47 after breaking through it to reach 8,962.95 in the morning. The last time the benchmark index was at the 9,000 level was in early July.
According to Thomson Reuters Datastream, Japan's Topix index carried a 12-month forward price-to-earnings of 10.7 versus a 10-year average of 16.7. The US S&P 500 had a 12-month forward P/E of 12.2. On Wednesday the Topix inched up to 745.64 as the number of shares changing hands on the board hit a two-month high of 2.1 billion, the most since June 8.
The Nikkei is 1.5 percent down since hitting a two-month high on July 4 on concern over a deepening euro zone debt crisis and sluggish global growth, but is still up 5 percent so far on the year. "Some investors were gunning for 9,000 as a strike price for the options SQ after European and US stocks rose overnight, but that momentum petered out," said Takashi Oba, senior strategist at Okasan Securities, referring to Friday's "options special quotation," or the montly settlement of a slew of derivatives.
Investors continued to punish companies for bad guidance, with chipmaker Dainippon Screen MFG Co Ltd dropping 8.9 percent and Pioneer Corp shedding 7 percent after both firms cut their earnings outlooks on falling demand and a strong yen. Japanese company earnings have been relatively weak so far this quarterly reporting season, with 53 percent of the 135 Nikkei companies missing market expectations compared to 40 percent last season, data from Thomson Reuters StarMine showed.
Helped by a softer yen, exporters Nissan Motor Co, Honda Motor Co and Fanuc Corp, an industrial robot maker, were in demand, rising between 1.3 and 1.4 percent. Although short-covering propelled Sharp up as much as 8.7 percent during the session, short interest in the troubled company remained high after it reported a first-quarter loss and revised its forecast to a full-year operating loss of 100 billion yen ($1.27 billion), from a previously estimated 20 billion yen operating profit.
Some 75.59 percent of its stock that is available to be borrowed out on loan as of Aug 6, according to data provider Markit, up from 73.70 percent on Aug 2 when it reported the results after the market close. Nikon Corp, which is due to report after Wednesday's close, advanced 2.6 percent after the Nikkei business newspaper reported that Intel Corp would shoulder tens of billions of yen in costs for the company to develop next-generation 450mm semiconductor wafers with a view to commercialising the product by 2018.
Competitor Canon Inc sagged 2.7 percent, however, as investors eyed the end of its share buyback programme, its second in two months. The programme was announced days after Canon cut its full-year operating outlook by 13 percent, blaming the euro zone crisis for hurting sales.