By V. Phani Kumar, MarketWatch
HONG KONG (MarketWatch) — Japanese stocks rebounded Friday to recover some of the steep losses suffered in the previous session, aided by a slew of monthly economic data and strong cues from Wall Street.
The Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK -0.23% ended 1.4% to 13,774.54 a day after it plunged by 5.2%. But the benchmark still ended with a loss of 0.6% in May, after rising in each of the past nine months. The broader Topix /zigman2/quotes/210598092/delayed JP:180460 +0.61% rose 0.1% on Friday.
“We think the recent plunge in [the] Nikkei is the result of the sharp appreciation in the yen and expect it to reverse,” said ING Financial Markets Research economist Sakpal Prakash.
He said the Bank of Japan ‘s accommodative policies are expected to lift the dollar /zigman2/quotes/210561789/realtime/sampled USDJPY +0.0231% to ¥110 by the end of the year, and to ¥115 by the end of 2014.
At Friday’s close, the Nikkei is still up 32.1% in 2013 to date. But it remained in a so-called correction territory, having lost more than 2,168 points, or 13.6%, from its high of 15,942.60 on May 23.
The sharp and swift correction in the Nikkei came amid worries the Federal Reserve may taper its asset purchases and also concerns over extreme volatility recently in the Japanese government bond markets, that also spilled over into the equity markets.
“Massive volatility in Japanese equities has been at the core of a general sense of unease around Asian markets in recent days,” said Niall King, an analyst at CMC Markets.
Elsewhere in Asia, South Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 -0.57% and Taiwan’s Taiex rose 0.1% each.
On the downside, Australia’s S&P/ASX 200 /zigman2/quotes/210598100/delayed AU:XJO -0.74% ended down 0.1%, Hong Kong’s Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI -0.47% fell 0.4% and the Shanghai Composite Index /zigman2/quotes/206600939/delayed CN:000001 -2.53% shed 0.7%.
The Shanghai benchmark, however, advanced 5.6% in May to emerge as Asia’s best performing index during the month.
The day’s performance came as stocks on Wall Street rose overnight on signs of further improvement in the U.S. housing market, while weaker-than-expected data on first-quarter economic growth and jobless claims raised hopes the Federal Reserve may keep its current level of bond purchases.
“Every U.S. data point about the pace of economic growth is being closely examined by market followers after Federal Reserve Chairman Ben Bernanke indicated that the central bank could pare back its stimulus efforts should the U.S. economy continue to improve,” said Perpetual head of investment-market research Matthew Sherwood.
“The Fed needs to improve its communication with the market about what its intentions truly are, but the stimulus is only likely to be reduced, not reversed,” he said.
In Japan, the rebound followed data showing April core consumer prices rose 0.3% from March, although they were 0.4% lower from the year-ago month.
Japanese industrial production during the same month rose 1.7% from a year earlier, but a survey indicated lingering pessimism, with manufacturers tipping flat output for May and a 1.4% drop in June.