Japan stocks fall after early gains

Japan's Nikkei share average breached the 11,000-point level at the open to a fresh 32-month high after the yen dropped sharply over the weekend, but it pulled back to be down by mid-morning as investors awaited local earnings for further cues.

The benchmark was down 0.3 per cent to 10,890.04 after striking 11,002.86 on bumper foreign orders after the yen dropped to 91 versus the US dollar on Friday, spurring interest in Japanese exporters whose overseas revenues are set to expand once repatriated.

Among those seeing fat gains was Sony Corp, which jumped 5.9 per cent after Citigroup raised its rating to "buy" from "neutral", saying the softer yen has enabled Sony to take more risks on operations such as the home appliance business.

"The potent mix of 'Abenomics' and strong risk appetite abroad is continuing to soften the yen, which means investors are still buying stocks," said Masayuki Doshida, senior market analyst at Rakuten Securities.

Hong Kong stocks rose 0.35 per cent in the first few minutes of trade today following a rally on Wall Street. The benchmark Hang Seng Index added 83.03 points to 23,663.46.

Global investor sentiment improved on Friday due to brighter prospects for the European economy and its debt crisis as well as solid US corporate earnings.

Against the yen, the US dollar hit 91.26 early on Monday, its highest level since June 2010 while the euro touched 122.91, its highest point since April.

New Prime Minister Shinzo Abe has called for aggressive monetary easing and huge fiscal spending to beat deflation. The yen has fallen some 13 percent since mid-November when he began making those calls as part of his election campaign.

"The potent mix of Abenomics and strong risk appetite abroad is continuing to soften the yen, which means investors will still be buying stocks," said Masayuki Doshida, senior market analyst at Rakuten Securities.

South Korean shares fell 0.7 per cent, after closing on Friday at an eight-week low, weighed by caution ahead of fourth-quarter earnings and a stronger won hitting exporters.

US stocks extended a rally to an eighth day, their best run since late 2004, with the Dow Jones Industrial Average and the benchmark Standard & Poor's 500 Index both closing at their highest in more than five years on solid US corporate earnings.

The improving global macroeconomic environment has curbed interest in safe haven assets such as gold.

Spot gold steadied around $US1658.54 an ounce on Monday, still below its 200-day moving average. As riskier equities rallied on Friday, bullion saw its biggest weekly drop this year on Friday.

US crude inched up 0.1 per cent to $US95.94 a barrel.

Investors pumped $US5.65 billion into stock funds worldwide in the latest week, with most of the sum flowing into emerging market stock funds, data from EPFR Global showed on Friday.

The euro hovered near an 11-month high of $US1.3480 hit on Friday. The Australian dollar stumbled to an eight-month low against the euro early on Monday.

The European Central Bank said on Friday banks will repay 137.2 billion euros in 3-year loans, more cash than expected, in a sign at least parts of the financial system are returning to health. The ECB lent banks a total of more than 1 trillion euros in twin 3-year, ultra-cheap lending operations in December 2011 and February 2012, easing funding concerns.

German Ifo business morale index improved for a third consecutive month in January to its highest in more than half a year, further evidence that Europe's largest economy is gathering speed again after contracting late last year.

European shares scaled fresh multi-month peaks on Friday, led by Frankfurt's DAX index scaling five-year highs.

Data on Sunday also showed profits earned by China's industrial companies rose 17.3 per cent in December from a year earlier to 895.2 billion yuan.

Investors will focus this week on the Federal Reserve's Open Market Committee statement on Wednesday and US nonfarm payrolls due on Friday.

Reuters

The story Japan stocks fall after early gains first appeared on The Sydney Morning Herald.

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