Jitters return in markets despite Nikkei surge

Japanese shares get another big lift as the yen drops but other markets struggle

Associated Press
Asian stocks flat, Japan backs off from high
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Men walk past an electronic stock indicator of a securities firm in Tokyo, Wednesday, Feb. 6, 2013. Shares were mostly higher in Asia early Wednesday, tracking gains in the U.S. and Europe, as the Japanese yen pushed sharply higher. The Nikkei 225 stock index gained 3 percent, or 329.98, to 11,376.90 as exporters shares soared on expectations of stronger sales thanks to the yen's gains against other major currencies. (AP Photo/Shizuo Kambayashi)

LONDON (AP) -- Japan's Nikkei's was the standout stock market Wednesday as jitters over the political situation in Italy and Spain prompted a renewed bout of jitters elsewhere.

The Nikkei surged 3.8 percent to its highest level since Sept. 2008 as the yen slid to a three-year low against the dollar on news the country's central bank governor will resign earlier than planned.

Its performance stood in stark contrast to the performance in Europe and the U.S., where some of the major indexes were trading sharply lower amid ongoing volatility, partly related to the political situation in Spain and Italy.

The concerns in the markets center on speculation that former premier, Silvio Berlusconi, may do well enough to hold the keys to power after elections later this month. In Spain, pressure has grown on Prime Minister Mariano Rajoy to resign over alleged illegal payments that he denies. Given their size, both countries are seen as key to a successful resolution of Europe's debt crisis.

"The political uncertainty surrounding Spain and Italy has not gone away," said Craig Erlam, market analyst at Alpari.

In Europe, the FTSE 100 index of leading British shares closed up 0.2 percent at 6,295 while Germany's DAX fell 1.09 percent to 7,581. The CAC-40 in France was 1.4 percent lower at 3,642.

On Wall Street, the Dow Jones industrial average recovered from earlier losses and was up slightly, 0.05 percent at 13,984 while the broader S&P 500 index was broadly unchanged, up 0.03 percent to 1,511.

The cooling in investor sentiment had an impact in other financial markets, too, with the euro down 0.3 percent at $1.3533 while a barrel of benchmark New York crude oil was 26 cents higher at $96.90.

Earlier, the Nikkei's 416.83-point gain to close at 11,463.75 was largely due to the performance of its exporters which saw their shares soar on expectations of stronger sales thanks to the yen's slide against other major currencies. A lower currency should help make Japanese products more competitive in international markets and potentially get the Japanese economy going again.

With Toyota Motor Corp. jumping 6 percent, Honda Motor Corp. adding 3.3 percent and Sony climbing 3.8 percent, investors appear more hopeful about the Japanese economy, which has been in stagnation for the best part of 20 years.

The Nikkei's surge came as the yen fell sharply after the Bank of Japan governor, Masaaki Shirakawa, said he will step down three weeks early on March 19, for logistical reasons. Some investors took it as a sign that his replacement will be more likely to comply with the new government's wish to ease monetary policy and cheapen the yen.

"The Nikkei is the top performing major equity index this year by a pretty wide margin for so early in the proceedings, up 10.3 percent," said Jennifer Lee, an analyst at BMO Capital Markets.

It was while the dollar surged to 94.05 yen that Japanese stocks posted their gains. Since the Asian stock market close, the dollar has eased back to around 93.54 yen.

Other markets in Asia eked some gains after suffering Tuesday. Hong Kong's Hang Seng rose 0.5 percent to 23,256.93 while Australia's S&P/ASX 200 gained 0.8 to 4,921. In mainland China, the Shenzhen Composite Index added 0.5 to 951.52 while the benchmark Shanghai Composite Index added 0.1 to 2,434.48.

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Elaine Kurtenbach in Tokyo contributed to this report.

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