Topix Index Caps 12-Day Rally on Strong Japanese Economic Data

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Japan’s Topix index rose for a 12th day as stronger-than-expected local economic data outweighed concern over an economic slowdown in the U.S.

Toshiba Corp. added 3.3 percent after the Nikkei newspaper reported the electronics group may move to restore its dividend. Mizuho Financial Group Inc. climbed 1.8 percent on reports it may boost its cash holdings. Teijin Ltd. jumped 3.9 percent after UBS AG upgraded its rating on the fiber maker. Takata Corp., embroiled in an auto air-bag scandal, lost 2.8 percent as shares continued moving lower following a brief respite last week.

The Topix rose 0.3 percent to 1,678.56 at the close in Tokyo, reversing losses of as much as 0.7 percent, to post its longest winning streak since August 2009. The Nikkei 225 Stock Average was little changed at 20,569.87. The yen traded at 124.15 per dollar after losing 4 percent in May, its biggest monthly decline since November. Strong data on Japanese capital spending and manufacturing outweighed a report on Friday that showed the U.S. economy shrank for the first time in a year.

Today’s readings should be read positively and “heading into the summer, the most important point will be watching how much the Japanese economy continues to recover,” said Yoshito Sakakibara, an economist at JPMorgan Chase & Co.’s asset-management unit in Tokyo. “We have to look very closely if domestic demand in Japan can outweigh that overseas weakness.”

Japan’s capital spending unexpectedly rose 7.3 percent in the first quarter from a year earlier, while company profits added just 0.4 percent. Markit/JMMA’s gauge of Japanese factory output climbed to 50.9 in May from 49.9 in April. A reading above 50 signals expansion.

U.S. Contraction

U.S. gross domestic product shrank at a 0.7 percent annualized rate in the first quarter. Bad weather, a swelling trade deficit caused by a strong dollar and plunging investment in oil exploration following a drop in fuel prices contributed to last quarter’s slump. The Institute for Supply Management-Chicago Inc.’s business barometer fell to 46.2 in May from 52.3 the prior month.

“The first-quarter contraction was due to temporary factors, so we had been looking for a recovery in the second quarter, but given the weak Chicago PMI, the recovery may not be that strong,” said Shoji Hirakawa, chief equity strategist at Okasan Securities Co. in Tokyo.

Toshiba Dividend

Toshiba added 3.3 percent after the Nikkei reported it was moving closer to restoring a dividend, which the company slashed last month amid an internal accounting probe. Analysts also pinned today’s increase on news the company received approval to delay its earnings release, which may help it avoid being delisted.

Mizuho climbed 1.8 percent, adding to last week’s 11 percent gain. A new corporate governance code taking effect today will force companies to disclose policies on cross-holdings, which SMBC Nikko Securities Inc. said could boost cash holdings as companies sell cross-held shares. Seperately, the Nikkei reported Mizuho reached an agreement to sell 230 billion worth of cross-held shares.

UBS raised its rating on Teijin to buy from neutral, sending shares 3.9 percent higher to 481 yen. The brokerage also lifted its price target for the manufacturer of polyester products to 550 yen.

Takata gave up all the gains it eked out last week, falling 2.8 percent. The air bag maker has slumped 42 percent over the past year, with losses accelerating last month after it issued the largest recall ever of any U.S. product.

E-mini futures on the Standard & Poor’s 500 Index rose 0.2 percent after the underlying measure dropped 0.6 percent on Friday in New York.

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