Japan stocks seen in tight range, buoyed by steel

By Staff
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TOKYO, Sept 4 (Reuters) Japanese stocks are expected to move in a tight range on Tuesday, buoyed by steel and shipping stocks, but trade is seen thin and capped by concerns about the economy after an unexpected drop in capital spending.

Shipping stocks are set to sail higher for the second straight day after the Baltic Exchange's Dry Freight Index hit a record high on Monday, with shares in firms such as Nippon Steel Corp likely to be strong on expectations they could raise their earnings forecasts later this week.

Nippon Steel will also be watched after a report in the Nikkei business daily that it and Mitsubishi Heavy Industries Ltd have reached a basic agreement to integrate their bridge-building operations.

European shares made gains on Monday, with Britain's FTSE 100 index hitting its highest close since Aug. 8, but that was not expected to have much of an impact on Japan, with investors holding back ahead of key events later this week.

''Basically everyone is looking to the U.S. for cues, so trade in Tokyo today is going to be light, with some concern about Japanese domestic demand after yesterday's data,'' said Norihiro Fujito, general manager at Mitsubishi UFJ Securities.

''Given that there's a lot going on later this week, including the release of U.S. non-farm payrolls data on Friday and a meeting of the ECB, a 'wait and see' mood is spreading.'' Markets were disappointed by government data on Monday showing Japanese firms cut capital spending by 4.9 percent in April-June from a year earlier, against a median forecast by economists for an 11.5 percent rise.

Goldman Sachs said in a report on Monday that following the data, the estimate of April-June GDP will be revised down, though it was too early to be pessimistic.

Revised April-June GDP data is due out on Sept. 10.

The benchmark Nikkei was expected to move between 16,400 to 16,600 and consolidate around the middle of the range, with trade light in the absence of participants and strong domestic trading factors.

Concern about Japan's economy is likely to keep gains capped, with the actions of foreign investors keenly watched.

On Monday the Nikkei shed 0.27 percent or 44.16 points to 16,524.93. The broader TOPIX index fell 0.17 percent to 1,605.44.

U.S. markets were closed for the Labor Day holiday on Monday, but in London the FTSE 100 index closed 0.2 percent or 11.9 points higher at 6,315.2. Banks were the best performing sector, but Fujito said that was unlikely to lead to gains by Japanese banks.

The dollar steadied in Europe and was around 115.90 yen in early Asian trade.

STOCKS TO WATCH -- Fast Retailing Co T> Fast Retailing, which operates the Uniqlo chain of casual clothing stores, will hold a news conference at 1 p.m. (0400 GMT) to outline its business strategy. President Tadashi Yanai will attend.

-- Mitsubishi Heavy Industries Ltd, Nippon Steel Corp T> Mitsubishi Heavy and Nippon Steel have reached a basic agreement to merge their bridge construction businesses, creating the industry's largest player, the Nikkei business daily reported on Tuesday.

Yokogawa Bridge is currently the bridge industry's biggest company.

-- NEC Corp China's biggest chip maker, Semiconductor Manufacturing International Corp, is in advanced talks to acquire smaller rival Hua Hong NEC Electronics, two sources familiar with the situation said on Monday.

Japanese electronics giant NEC Corp holds a nearly 20 percent stake in Hua Hong NEC.

-- Hitachi Construction Machinery Co T> Hitachi Construction plans to boost its production capacity for hydraulic excavators to 61,000 machines by the business year starting in April 2010, up 70 percent from the year ended in March 2007, the Nikkei business daily reported on Tuesday.

-- Disco Corp T> The maker of semiconductor cutting saws announced on Monday that it would invest 12.5 billion yen to build two new buildings to improve efficiency and be better prepared to supply its customers in the case of a natural disaster such as an earthquake.

The buildings, to be built at its Kuwabata and Chino plants in Japan, will be earthquake-absorbing structures and come on-line in late 2009, the company said in a release.

-- Ito En Ltd The drinks maker said on Monday its group operating profit rose 6 percent from a year earlier to 5.04 billion yen in the first quarter to the end of July, helped by strong sales of its ''Oi Ocha'' tea drinks as well as efforts to curb spending on advertising and marketing, and cut production costs.

-- Sanyo Electric Co T> A private equity consortium led by the Longreach Group has positioned itself as the likely winner of a battle for Sanyo's semiconductor unit by placing the highest bid of around 100 billion yen, the Nikkei reported on Tuesday.

-- Suzuki Motor Corp Suzuki Motor plans to export low-priced compact cars to Russia from its manufacturing base in India, starting in about 2010, the Nikkei reported on Tuesday.

REUTERS BJR KN0504

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