Tokyo shares outlook - Higher on Wall Street gains after Fed's rate cut

Tokyo shares outlook - Higher on Wall Street gains after Fed's rate cut

	Published : Wed, 31 Oct 2007 22:49 By : Agencies Print this Story

TOKYO (Thomson Financial) - Japanese shares may open higher on Thursday as investors welcome strong gains on Wall Street overnight after the Federal Reserve lowered interest rates as expected and said risks to the financial markets from the recent credit crisis have eased.

In offering the 25 basis point rate cut in the benchmark lending rate to 4.50 percent, the Fed said economic growth was 'solid in the third quarter, and strains in financial markets have eased somewhat on balance.'

This provided a great deal of relief to the US market, which has been worried about the depth of the credit crisis.

The central bank's decision came after the US Commerce Department said the country's gross domestic product grew at an annual rate of 3.9 percent in the third quarter, a faster pace than the 3 percent growth forecast by economists.

The yen's weakness in the wake of the strong gains on Wall Street and the Fed rate cut is also expected to buoy the Japanese market, as it reduces the downside risk for Japanese exporters.

Meanwhile, rising commodity prices may weigh on the market after oil futures climbed to nearly 95 US dollars per barrel after the government reported an unexpected drop in crude oil inventories for the second week in a row. Light, sweet crude rose 4.15 dollars to settle at 94.53 dollars on the New York Mercantile Exchange.

The Dow Jones Industrial Average closed up 137.54 points or 1 percent at 13,930.01, while the Nasdaq composite index rose 42.41 points or 1.51 percent to 2,859.12.

The Chicago-traded Nikkei futures contract settled at 16,855 points, up from 16,700 on the Osaka Securities Exchange on Wednesday, suggesting a firm start for the market.

In Tokyo yesterday, the Nikkei 225 Stock Average closed up 86.62 points or 0.5 percent at 16,737.63, while the broader TOPIX index rose 12.86 points or 0.8 percent to settle at its intraday high of 1,620.07.

Ahead today, the Japan Automobile Dealers Association will release new car sales data for October.

On the corporate front, Daihatsu Motor and Konica Minolta Holdings will announce results for the half year to September, while Bridgestone will report results for January-September.

Stocks to watch include Japan Airlines Corp following a report that Japan's largest carrier plans to merge its subsidiary Japan Asia Airways Co into core group company Japan Airlines International Co as early as April in an effort to streamline costs.

Nippon Oil, Hitachi and TDK may see some buying after they reported healthy profit growth for the first half ended in September yesterday.

(1 US dollar = 115.35 yen)

yasuhiko.seki@thomson.com

yas/ng

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