Japanese stocks rose to a nine-week closing high on Monday on hopes for a good corporate sentiment survey this week, but other Asian markets fell and the dollar drifted ahead of an expected rise in U.S. interest rates. Anticipation that the quarterly Bank of Japan "tankan" sentiment survey, due on Thursday, would show companies were more upbeat than they have been since the early 1990s lured investors to undervalued blue-chip stocks, such as optical fibre maker Furukawa Electric Co <5801.T>, which rose three percent. The Nikkei average <.N225> closed up 0.9 percent at 11,884.06. Mazda Motor Corp <7261.T> surged 4.9 percent after a newspaper reported the company, Japan's fifth-largest auto maker, planned to increase output of engines for two popular car models. Other Asian stock markets were broadly lower. An MSCI index of non-Japan Asian share markets <.MSCIAPJ> was down 0.6 percent by 0605 GMT, led by a 1.6 percent slide on Taiwan's TAIEX <.TWII>. Taiwan banking shares <.TFNI> were hit by worries the stock market's weakness in May and June would hit their second-quarter earnings. Financial bookmakers in London expected Britain's FTSE 100 <.FTSE> to open 5-10 points weaker, with Germany's DAX index <.GDAXI> opening 12-17 points softer and France's CAC-40 <.FCHI> starting 5-14 points lower.
FED FOCUS
The U.S. Federal Reserve's two-day rate-setting policy meeting kicks off on Tuesday. The central bank is expected to raise the benchmark rate by 0.25 percentage point from a 46-year low of one percent. "The market is paying attention to the Fed's statement to see how quickly the Fed will raise rates after this meeting," said Toshihiro Azuma, forex manager at Sumitomo Trust and Banking. The euro bought around $1.2138 , while the dollar was around 107.84 yen , not far from late U.S. levels on Friday. Some market players were nervous about growing violence in Iraq ahead of the handover of sovereignty on June 30. On Sunday an Iraqi militant group said it had captured a U.S. Marine, threatening to behead him. Ahead of the tankan, Japanese industrial output data for May, due on Tuesday, is also keenly awaited for clues on the sustainability of Japan's export-led growth. Japanese government bond prices were little changed as the market awaited the data due out this week. Analysts said that after a brief short-covering JGB rally on Friday, investors were again focussing on the upside potential for yields. The yield on the 10-year JGB surged 50 basis points from late May to a near four-year high of 1.94 percent last week. The key 260th 10-year JGB <0#JPTSY=JBTC> rose two basis points to 1.855 percent. In the United States, the market will be focused on Friday's nonfarm payroll data, expected to show a gain of 250,000 jobs in June versus 248,000 previously, and Tuesday's consumer confidence survey, which could show a slight increase for June. U.S. stocks were expected to rise later this week, once the Fed meeting is over, but trading should wind down ahead of a holiday weekend. U.S. financial markets will be closed on Monday, July 5, in observance of Independence Day.
NYMEX crude futures dropped one percent on Monday, extending last week's losses after the government of world-number-three producer Norway intervened to end an eight-day-old strike. Traders expected prices to fall further following an increase in U.S. oil inventories and the recovery in Iraq's crude exports after the repair of sabotaged pipelines. NYMEX light crude for August delivery fell 46 cents, or 1.2 percent, to $37.09 a barrel in electronic trading. Spot gold reversed direction to trade at $401.60 an ounce, down slightly from $402.00 last quoted in New York.///