Nikkei rally 'may be short-lived'

The Nikkei stock average climbed above 10,000 for the first time in two months today, boosted by buying from Asian investors, but traders said the rally may be short-lived without more signs of stability in major economies.

Property companies and financial shares led gains in the index, with some investors emboldened by US manufacturing activity data released on Friday to push the Nikkei back up towards a high on May 2nd and a chart gap that opened in the wake of the devastating March quake.

The pace of growth in US manufacturing picked up for the first time in four months in June, fuelling optimism that the recent economic slowdown will be temporary.

"Asian investors tested the 10,000 mark, but whether the rally continues for rest of this week is questionable," said Makoto Nagahori, head of equities at Instinet.

A clear break of the May 2 intraday high of 10,017.47 would pave the way for a test of the chart gap created immediately after the March 11th quake, with the gap lying at 10,050 to 10,254, and may signal a departure from the 9,400-9,800 range that the Nikkei has mostly traded in since the quake.

But investors will still be cautious about the US economic outlook and are waiting for the outcome of jobs data due out on Friday.

The benchmark Nikkei ended up 1.0 per cent at
9,965.09 after rising as high as 10,005.75, trading above 10,000 for the first time since May 2. The broader Topix index gained 1.2 per cent to 864.11.

Analysts also said Asian investors would refrain from sharply increasing their allocations of Asian stocks for now partly because of weaker-than-expected Australia retail sales.

Australian retail sales unexpectedly fell 0.6 per cent in May, the biggest drop in seven months and another sign of consumer caution that adds to the case against a hike in interest rates in the near term.

"It is going to take a little longer for investors to build up solid positions as US quarterly earnings releases are starting next week," said Tsuyoshi Segawa, an equity strategist at Mizuho Securities.

The Nikkei's climb to 10,000 prompted some position unwinding with Tokyo Electric Power Co the biggest beneficiary.

Its shares jumped 20 per cent to 393 yen, its highest level in nearly seven weeks and it was the most actively traded stock on the main board by turnover. Speculators were unwinding positions built after the market hit lows following the March 11th disaster, when they went long on major Japanese shares and short on the troubled utility, a trader said.

Tokyo Tatemono , a real estate developer, soared 5.8 per cent to 311 yen after Goldman Sachs hiked its rating by two notches to "buy" from "sell".

Bridgestone Corp, Japan's largest tyre maker, gained 2.8 per cent to 1,916 yen after the firm said it would lift truck and bus tyre prices in Japan by an average of 10 per cent.

Access jumped 12 per cent to 74,100 yen after the developer of mobile phone software said today it had signed a patent licence agreement with mobile phone maker Nokia.

The banking sector climbed as investors increased investment in large cap stocks, with Mizuho Financial Group adding 3.0 per cent to 137 yen and Mitsubishi UFJ Financial Group gaining 2.8 per cent to 409 yen.

Reuters