Nikkei to rise, may hit 15-month high; resources strong

Japan's Nikkei stock average is set to rise on Tuesday and could aim for a 15-month high on broad buying after confidence in the global economy was boosted by a US report showing the manufacturing sector expanded for a fifth straight month.

Japan Airlines Corp is likely to gain attention after the struggling airline said on Monday that more than two-thirds of its employees have agreed to proposed pension cuts, clearing one key hurdle in its push to reduce its pension shortfall, a prerequisite to a state bailout.

A person with knowledge of the matter also said on Monday that JAL could remain listed after filing for bankruptcy in a restructuring plan under consideration by a state-backed turnaround fund.

Both the Dow and the S&P 500 rose to their highest close in 15 months on Monday after the Institute for Supply Management's manufacturing index in December rose to its highest level since April 2006.

"There's broadening confidence in global economic recovery, the dollar is well above 92 yen, and JAL appears to be less of a worry for now," said Hiroichi Nishi, general manager at the equity division of Nikko Cordial Securities.

"The only issues that could cool the rise are a lack of trading volume and the yen starting to strengthen again."

The dollar lost some ground on Monday as optimism about global recovery encouraged investors to seek riskier investments such as stocks and commodities, giving up some gains that had earlier lifted it to a four-month high of 93.21 yen.

Market players said the smooth debut of the Tokyo Stock Exchange's high-speed trading system would encourage investors who had sidelined themselves on Monday, the first day of operation, to trade on Tuesday, increasing volume.

The benchmark Nikkei is likely to trade between 10,650 and 10,850, quite possibly breaking above the 2009 high of 10,767 to touch a 15-month intraday high, with resource shares likely to be especially strong after commodity prices rose.

The Nikkei hit a 15-month closing high of 10,654.79 on Monday.

In a sign the Nikkei is set to open higher, Nikkei futures traded in Chicago  closed at 10,875, up 2.2% from the Osaka close.

Stocks to watch
Fast Retailing
Fast Retailing said on Monday that same-store sales at its Uniqlo budget fashion chain rose 11.5% in December from a year earlier.

Sharp Corp
Sharp said it would set up a joint venture with Enel and STMicroelectronics by March to make solar cells in Italy, in a bid to further tap the strong growth potential of renewable energy sources.

Takeda Pharmaceutical Co
Takeda said on Monday that its drug Velcade, used to treat the second most common form of blood cancer, can now state on its label that it has led to longer survival among patients with the often fatal illness, after US regulators approved the change.

Mitsubishi Corp, other trading houses
Commodities prices rose on Monday as investors, reassured by increasing signs of global economic recovery, sought out riskier assets, while oil prices rose more than $2 to settle above $81 a barrel on cold weather in the United States and other big consumer regions.

Honda Motor Co
Honda plans to use Indian steel sheet for the first time when it starts making small cars in India next year to lower materials costs, the Nikkei business daily reported on Tuesday.

It will procure most of the steel sheet for the 2CV subcompact from multiple sources, including major Indian steelmaker Tata Steel Ltd, the Nikkei said.

Orix Corp
Orix plans to invest 300 billion yen in promising Chinese companies in such business areas as finance and infrastructure over the next three years, the Nikkei business daily reported on Tuesday.

All Nippon Airways
The transport ministry has decided to allocate more takeoff and landing slots to All Nippon Airways than to Japan Airlines Corp for a new runaway at Haneda airport set to open in October, the Nikkei business daily reported on Tuesday.