Nikkei average gains

The Nikkei average gained on Monday after European leaders agreed to draft a new treaty for deeper economic integration, but market players said the short-covering bounce may not last as the deal was no panacea for the region's long-term debt worries. The Nikkei closed just below its 75-day moving average and trading volume was thin, in a sign investors were still not confident that the worst for the debt crisis is over in Europe.
"Europe is about one month behind the schedule they announced in October, in terms of putting the bailout fund to work and reinforcing banks capital. The European crisis will continue to be a burden on the market," said Mamoru Suzuki, chief economist at Mizuho Research & Consulting. European leaders agreed last week to pursue a tougher budget pact with automatic sanctions in the currency bloc but investors remain nervous as a new treaty could take three months to negotiate and may require loseable referendums in some countries.
"Yes, they agreed on a budget pact, but it has no binding powers and there is no treaty yet...They have brought forward the European Stability Mechanism to next year but it has no banking license. I do not see why stocks are rising on this," said Seiki Orimi, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
The benchmark Nikkei gained 1.4 percent to 8,653.82, just below its 75-day average near 8,660, seen as a key resistance level. Further resistance looms at the bottom of the Ichimoku cloud at 8,747.70. The broader Topix index added 1.2 percent to 746.69. Shanghai shares slipped to a 2-1/2 year low on Monday, which makes a three-day summit on economic priorities convened by Chinese leaders ending on Wednesday all the more important.
Market players are looking for signs of further policy easing after the Chinese central bank made an earlier-than-expected move last month to cut banks' required reserves amid worries China could be bruised by problems in Europe, its biggest export market. The US Federal Reserve is expected to adopt more easing next year, though it looks set to hold off on easing monetary policy at its next policy meeting on Tuesday.
Shares of scandal-hit Olympus jumped 7.8 percent to 1,300 yen, their highest in more than six weeks, after the company said it was preparing to file its July-September earnings by Wednesday, a necessary step to remain listed. Toyota Motor Corp dropped 0.7 percent to 2,617 yen after the company cut its annual profit outlook by more than half due to the strong yen and floods in Thailand. About 1.51 billion shares changed hand on the Tokyo Stock Exchange's main board, 5 percent less than the average of the past 20 days. There were 1,272 advancing issues versus 289 decliners.