Tokyo's stock market made small gains on Tuesday, clawing back some of the previous day's heavy losses, but expectations the United States will raise interest rates next month kept a lid on the rebound. Most other Asian markets were a little easier around midday, with an MSCI index of Asia Pacific shares excluding Japan <.MSCIAPJ> down 0.3 percent at 0225 GMT. Share market sentiment was helped by lower oil prices, with a barrel of U.S. light crude quoted at $38.93, more than one dollar below a recent 13-year peak after Saudi officials called for higher output. The Nikkei stock average <.N225>, where a 1,200 point slump in six sessions prompted Finance Minister Sadakazu Tanigaki to say he was following market developments closely, gained 0.19 percent to 10,905.85 by Tokyo's midday. Japan's broader TOPIX index <.TOPX> rose 0.50 percent to 1,090.98, after losing 10 percent in four trading days, as investors bought shares in banks, insurers and technology firms.
Analysts said Japan's market had fallen too far recently, given a healthy economic outlook and improving corporate earnings. "There wasn't any particular reason to sell Japanese stocks apart from the U.S. rate hike jitters. But even so, stocks have been sold too much," said Terushi Hirotama, head of trading at Ichiyoshi Securities. But NTT Data Corp <9613.T>, Japan's biggest system integrator, lost 9.5 percent to 343,000 yen after it said current year profits would drop by 40 percent. NTT faces downward pricing pressure on many of its projects. Taking advantage of low U.S. rates, many investors had borrowed dollars to buy higher yielding currencies and shares around the globe, particularly in Japan -- a so-called dollar-carry trade. They have been rushing to close such positions as their funding costs look sure to rise sooner rather than later, boosting the dollar against most other currencies in recent days. "There has been unwinding of dollar-carry trade," Toshiaki Kimura, forex manager at Mitsubishi Trust and Banking Corp, said.
DOLLAR EASIER
The region's small stock gains followed Monday's broad sell-off across world markets after the U.S. had said it created more new jobs than expected in April, raising equity investors' fears about accelerated rate hikes by the U.S. central bank. U.S. bond yields have already risen sharply in recent weeks. The Dow Jones industrial average <.DJI> lost 1.26 percent to close below 10,000 points for the first time since mid-December. Europe's main exchanges dropped by between two and four percent. By 0202 GMT, the dollar had eased back to 113.24 against the yen , from 113.65 in late U.S. trade, and off an overnight eight-month high of 114.15. But the greenback is still supported by a growing consensus the U.S. will raise rates from a 46-year low of one percent. The euro was around $1.1868 , little changed from late U.S. levels, and slightly firmer to the yen, at 134.35 . Hong Kong's blue chip Hang Seng Index <.HSI> opened lower, triggering some late morning selling in regional exchanges.
BONDS SAG
The yield on Japan's benchmark 10-year JGB <0#JPTSY=JBTC> rose to 1.525 percent, up 2.5 basis points from late Monday, as government bond (JGB) prices eased amid the stock rebound and ahead of an auction of 1.9 trillion yen ($16.70 billion) of 10-year JGBs. Leading oil exporter Saudi Arabia said OPEC should raise supply to stop high prices denting world economic growth. Saudi Oil Minister Ali al-Naimi said the OPEC cartel should raise its production target by over six percent to at least 25 million barrels per day when it meets on June 3. Fellow Gulf members the UAE and Iran have also said OPEC could raise official quotas to cool surging crude prices, which had jumped $7 a barrel, or 22 percent, so far this year. Gold rose a touch to $379 an ounce in early Asia trade, with dealers citing renewed interest from Japanese investors.///