REUTERS – Japan’s Nikkei share average is expected to remain steady through Friday morning but could drop later in the day with risk appetite tempered after S&P cut Spain’s rating, and if the Bank of Japan disappoints with its decision on whether to introduce further easing measures.
Market participants said the Nikkei was likely to trade between 9,550 to 9,700 after Nikkei futures in Chicago closed at 9,605 up 45 from the close in Osaka of 9,560.
Market consensus is that the BOJ will extend its asset purchases by up to 10 trillion yen and some strategists say it may also decide to buy longer-dated Japanese government bonds.
The Nikkei ended flat on Thursday, closing at 9,561.83 after disappointing results from several companies eroded earlier gains.
Although investors have held back from taking major positions this week before the announcement, the expected move has already been priced into the market, says Masayuki Doshida, senior market analyst at Rakuten Securities.
“The BOJ decision to ease in February was a surprise, but this time they’re expected to, so unless they really dazzle today the Nikkei won’t go up. In fact it’s far more likely to go down if they don’t meet expectations,” he said.
The morning session could see the Nikkei climb on the back of U.S. stocks, which rose for a third day on Thursday after upbeat housing data and stronger-than-expected results from several companies, notably software company Citrix CTXS.0.
Results from a slew of Japanese companies could boost the index if they outdo expectations. The auto industry in particular will be in the spotlight, with Honda (7267.T) and Mazda Motor Corp (7261.T) both giving guidance after the bell.
But investors may be reluctant to make major adjustments to their positions ahead of three Japanese national holidays next week, falling on Monday, Thursday and Friday, said Doshida.
More negative news from the euro zone could also inhibit risk-taking after S&P downgraded Spain’s credit rating by two notches to BB-plus from A with a negative outlook. S&P said it expects the government budget deficit to worsen even more than previously anticipated due to economic contraction.
The Nikkei is down 5.2 percent this month, on track for its worst April performance in seven years, after rallying more than 19 percent in January-March to log its best first quarter gain in 24 years.
STOCKS TO WATCH
-ASAHI GROUP HOLDINGS (2502.T)
Asahi Group Holdings Ltd is in final negotiations with Ajinomoto Co (2802.T) to buy its beverage unit Calpis Co in a deal that may be valued at around 100 billion yen, The Nikkei business daily reported.
Asahi, which currently ranks fourth in the domestic soft-drink market with a 9.9 percent share, would move up to the third place with a 12.4 percent share after the deal, the paper said.
-TOKYO GAS (9531.T)
Tokyo Gas Co Ltd is to raise the capacity of its gas-fired power plant in Yokohama by 400 megawatts to 1,200 megawatts in 2015, costing up to 40 billion yen, said the Nikkei business daily. The utility is also due to announce its earnings for the past year and give guidance for the current financial year at 1600 Tokyo time (0500 GMT).
-BANK OF TOKYO-MITSUBISHI UFJ (8306.T)
The Bank of Tokyo-Mitsubishi UFJ hopes to generate 40 percent of its gross profit through overseas operations in a 3-year business plan, said the Nikkei business daily.
(Reporting by Sophie Knight; Editing by Eric Meijer)