Nikkei hits one-week high, US earnings eyed

Japan's Nikkei share average climbed to a one-week high on Friday, rising above the key threshold of its 25-moving average after smooth European debt auctions prompted buying of exporters, while the market remained on edge ahead of US corporate earnings.

Exporters with exposure to Europe were in demand as the euro gained against the yen after successful Italian and Spanish debt sales eased investor concern of an immediate credit crunch .

Canon rose 3.1% and Konica Minolta Holdings gained 1.7%.

"The market is temporarily rebounding but the fundamental problems in the euro zone still remain. Nobody knows how long the euro will continue to climb against the yen," said Yutaka Miura, a senior technical analyst at Mizuho Securities.

The Nikkei average rose 1.4% to 8,500.02, closing above its 25-day moving average near 8,475, while the broader Topix advanced 1.1% to 734.60.

The euro climbed to 98.68 against the yen, off an 11-year low hit recently.

Trading volume on Tokyo's main board rose to 1.69 billion shares, up from 1.39 billion the previous day, due to settlement of January options contracts in a so-called "SQ" special quotation. The Osaka Securities Exchange said after the close that Nikkei options were settled at 8,470.71.

Honda Motor Co was the biggest gainer on Tokyo's core 30 list, which closed at a four month high. The firm gained 3.4% to 2,553 yen on a legal victory for its US unit after an appeals court threw out a nationwide lawsuit over a brake system used in some of its vehicles.

Rival automakers also outperformed the market, with Toyota Motor Co <7203.T> gaining 1.6% and Nissan Motor Co up 2.5% on the euro's gains.

Japan's top oil and gas explorer Inpex Corp added 1.2% after it gave the go-ahead for the $34 billion Ichthys liquefied natural gas export project in Australia, in which it has a 73% stake.

Among engineering firms involved in the project, JGC Corp climbed 3.9% and Chiyoda Corp gained 3.1%.

Shift in focus

Market participants said that their immediate focus had shifted from the debt turmoil in Europe to US corporate earnings.

Masayuki Otani, chief market analyst at Securities Japan, said investors would like to see the extent of Europe's impact on US banks when they report earnings, starting with JPMorgan Chase & Co on Friday.

"US retail sales were weaker in December but it is expected that the recovery will be patchy and there is no denying that the economy is on track for a recovery," he said.

Strategists said results of technology companies including Intel  next week would also be a gauge of US firms' ability to weather Europe's debt storm.

"The Nikkei is lagging behind global markets in a sense that investors are unwilling to step in as there are no particular factors to prompt buying," said Ryota Sakagami, chief strategist of equity research at SMBC Nikko Securities.

"In this environment, the US earnings may provide some sense of clarity on the euro zone's impact."

Nomura recommended that investors pick up trading companies and financials as they offer "high beta", meaning they tend to outperform the wider market in good times though underperform in bad times. It said they have high dividend yields and low risk of dividend cuts ahead of the end of the financial year on March 31.