Nikkei creeps up on large-cap gains but Europe woes weigh

Gains in a few large cap stocks boosted Japan's Nikkei share average on Wednesday, but the broader market was weak as investors remained concerned about Spain's struggle to finance its debt and looming elections in Greece.

The Nikkei rose 0.6% to 8,587.84, propped up by index heavyweights Fast Retailing and Softbank and other companies with strong domestic sales. Decliners outpaced advancers by a ratio of 8 to 7.

"Investors don't really want to be trading at all ahead of the Greek election, so they've resigned themselves to placing safe best on stocks with little foreign exposure," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

Fast Retailing Co Ltd and Softbank Corp both rose 1.8% while defensive stalwart Japan Tobacco Inc gained steadily through the day as risk appetite waned, closing up 1.6%.

Spanish bond yields hit a euro-era high on Tuesday on worries about the effectiveness of a bailout agreed over the weekend for Spain's banks.

Some sectors were lifted from Tuesday's troughs, when the Nikkei average dropped 1% with losses across the board. Iron and steel rose 1.8% as the best-performing sector, buoyed by a gain of 3.6% for Nippon Steel Corp.

"The market is the quietest it's been for a long time with no big news out, although prices are looking stronger," said a partner at a foreign hedge fund.

Hitachi Ltd gained 2.4% after the Nikkei business daily said the company plans to buy German power plant service provider Xervon Energy GMBH for several billion yen by the end of 2012.

Konica Minolta Holdings Inc closed up 0.5% after rising as much as 3% after Credit Suisse upgraded the camera maker to "outperform" from "neutral", saying profit margins should improve in its production printing arm to boost operating profit to 52.8 billion yen this year, 10% ahead of guidance.

The broader Topix, which struck a 28-year low on June 4, inched up 0.3% to 726.44 after slipping into negative territory in the afternoon session. Trading volume was moderate, with the daily average this week reaching just 3/4 of last week's figure.

"Technically speaking the next upside target for the Nikkei is the 25-day moving average at around 8,644," said Yutaka Miura, senior technical analyst at Mizuho Securities. "But when the market falls after an options settlement, as it did last Friday, that puts it at risk of another fall."

The Nikkei was toppled from its one-year high of 10,255.15 on March 27 as the euro zone debt crisis intensified and concerns grew about economic slowdowns in the United States and China. Last week, the index managed to snap a nine-week losing streak, its worst in 20 years, after a brief technical rally.

A full calendar ahead

In addition to a potentially game-changing election in Greece on Sunday that could force the country to leave the euro zone, investors are also eyeing a G20 meeting next week and upcoming policy meetings at the Bank of Japan and Federal Reserve.

"If the BOJ extend their easing programme it won't be welcomed with any fanfare because they've run down their budget so much that the market expects it," said Yutaka Miura, senior technical analyst at Mizuho Securities.

The BOJ bought 26.3 billion yen worth of exchange-traded funds on Tuesday to support the market.

Others expected the bank to hold fire on policy until July.

"I really don't think the Bank of Japan will ease this time because they're waiting to see what happens with the Fed and with Europe," said Akino of Ichiyoshi Investment Management.