Japanese shares will stay steady this week, barring surprises from results for US chip giant Intel and Congressional testimony by Federal Reserve chairman Alan Greenspan, dealers said. While many analysts are optimistic that the Tokyo stock market will test the topside, some strategists warned recent gains were based more on hopes than a marked improvement in fundamentals.
Japan's jobless rate in May hit a six-year low, supporting optimism about higher consumer spending, but skeptics argued that it was too early to say strong first-quarter economic growth would be sustained.
"Intel's earnings announcement and Greenspan's Congressional testimony will hold the key to set the direction for the Japanese market," said Masayoshi Yano, analyst at Tokai Tokyo Research Center.
Investors are unlikely to make major bets one way or the other until Thursday, when both events are scheduled.
Also on deck in Japan are a quarterly business survey by the finance ministry due Monday, which economists use to forecast revised first-quarter gross domestic product (GDP), and May machinery orders out Thursday.
The economy grew a stronger-than-expected 1.3 percent in the January-March quarter, or an annualised 5.3 percent, as higher corporate and consumer spending offset faltering exports.
The government will release revised GDP data on June 13.
"I believe the Japanese market has been on a solid footing," Yano said. "We are seeing investment trusts, institutional investors and trust banks buy Japanese shares."
"It would be difficult to make major moves until (after Thursday) but I would say the Nikkei index will challenge the higher side of the current range in the coming week," he said.
Yano expects the index to move between 11,200 and 11,500.
Other analysts, however, pointed to downside risks, arguing the current firm market has been supported largely by brighter investor sentiment and not necessarily improved fundamentals.
"Because market sentiment has improved, investors are moving into areas of high volatility like (tech-heavy) Nasdaq," said Masatoshi Sato, senior strategist at Mizuho Investors Securities.
"But the firmness is not coming from fundamentals. I think New York markets will take a breather sometime soon and possibly go into an adjustment period," he said.
Many market participants stayed more bullish in part because many pension funds tend to make purchases in June, Sato said.
"We don't have any strong factor to push down the market but downside risks remain. The market may test the lower end of the current range in the coming week," he said, predicting the Nikkei to move between 11,100 and 11,400.
For the week ended June 3, the Nikkei-225 index gained 107.72 points or 0.96 percent to 11,300.05 while the broader TOPIX index of all First Section shares advanced 15.38 points or 1.36 percent to 1,147.72.
Average daily volume was 1.38 billion shares with average value of daily turnover of 1.23 trillion yen (11.45 billion dollars), up from 1.24 billion shares worth 1.09 trillion yen the previous week.
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