Nikkei ends three-day winning streak amid overheating concerns

Tokyo stocks snapped a three-session winning streak Monday after selling to cash in gains and buying on dips amid persistent economic recovery hopes vied with each other.

The 225-issue Nikkei average fell 8.19 points, or 0.04 percent, on the Tokyo Stock Exchange to close at 19,246.06. On Friday, the key market gauge surged 263.14 points.

The Topix index of all first-section issues lost 2.12 points, or 0.14 percent, to end at 1,558.21, after rising 13.70 points the previous day.

The Tokyo market got off to a weaker start following Wall Street’s tumble over the weekend. It was also pressured by a sense of overheating that had grown since the Nikkei average finished above 19,000 for the first time in some 15 years on Friday.

The indexes, however, soon popped up into positive territory thanks to buying on dips on the back of expectations for higher prices ahead.

In the afternoon, stocks were hit by stepped-up selling to lock in profits on the three-day rally through Friday, where the Nikkei average gained some 600 points. But the market’s downside was underpinned by the “economic recovery” prospect, brokers said.

Investors cheered media reports that Toyota’s labor and management reached an agreement on a pay-scale increase of ¥4,000 per month for fiscal 2015, which is smaller than ¥6,000 demanded by the union side but far larger than the previous year’s actual hike of ¥2,700.

“Following the news, expectations ballooned that wages at other companies, including small firms, will also go up markedly,” said Hiroichi Nishi, equity general manager at SMBC Nikko Securities Inc.

Still, investors could not purchase aggressively as several technical charts suggested market overheating, such as the advance-decline ratio in the TSE’s first section, which had risen to 137 as of Friday, brokers said.

Players were also reluctant to buy up ahead of monetary policy meetings in Japan and the United States later this week. The Bank of Japan will end its two-day Policy Board meeting on Tuesday, while the U.S. Federal Reserve will hold its Federal Open Market Committee meeting for two days through Wednesday local time.

Despite the key price indexes’ drops, winners outnumbered losers 955 to 790 in the TSE’s first section, while 123 issues were unchanged.

Volume fell to 1.977 billion shares from Friday’s 3.198 billion shares.

Realtors Sumitomo Real Estate and Mitsui Fudosan were hit by selling from investors who were disappointed at slumping new condominium supply in the Tokyo metropolitan area in February.

Industrial robot maker Fanuc, electronics maker Sony, mobile phone carrier Softbank and Japan Tobacco were also among major losers.

But ANA Holdings and Japan Airlines were buoyant on continued expectations that their earnings will be boosted by falling oil prices.

Also on the plus side were mega-banks Mitsubishi UFJ, Sumitomo Mitsui and Mizuho.

In index futures trading on the Osaka Exchange, the key June contract on the Nikkei average rose 50 points to 19,250.

Nikkei Futures

nikkeifutures.org@imediaone.com

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