Nikkei set to rise above 13,000 on U.S. stock gains
TOKYO, June 27 (Reuters) - Japan's Nikkei share average is expected to snap a three-day losing streak on Thursday after U.S. stocks rose on reduced concern that the Federal Reserve will scale back its stimulus in the near future. Market players said the Nikkei was likely to trade between 12,800 and 13,100 after falling 1.0 percent to 12,834.01 on Wednesday. Nikkei futures in Chicago closed at 13,010, up 1.8 percent from the close in Osaka of 12,780. The Nikkei has fallen 3 percent over the past three days, hit by worries about a cash crunch in China and ongoing concerns about the Fed's plan to trim its massive bond buying programme. U.S. stocks rose on weaker-than-expected GDP data, on a view it could influence the Fed's considerations of whether the economy is strong enough for it to begin scaling back its $85 billion a month in bond purchases. Analysts said bargain hunting and short-covering will likely lift the Tokyo market in early trade. However, the upside may be limited, with resistance around 13,100 as investors are still concerned that China was sliding towards a liquidity crisis. "If China shares are weak today again, the Japanese market could see volatility and the Nikkei could be dragged down to around 12,800," said Kenichi Hirano, a strategist at Tachibana Securities. "The entire day's mood will depend on how Shanghai shares will perform." Selling in small-to-mid size stocks by retail investors also hurt sentiment on Wednesday and triggered a sharp sell-off in the Mothers market, which nosedived 12 percent. "Overall sentiment's recovery depends partly on small caps' performance because it represents retail investors' appetites," Hirano said. The benchmark Nikkei has dropped more than 19 percent since reaching a 5-1/2-year high on May 23, hurt by slowing growth in China, fears of a pullback in U.S. stimulus and disappointment over the Japanese government's recentl growth strategy.
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