Japan’s Topix Soars Toward Biggest Gain Since 2008

Stocks soared in Tokyo, with the Topix posting its biggest gain in more than seven years, as investors judged shares had been oversold and a report showing Japan’s economy shrank more than expected last quarter boosted the outlook for central bank stimulus.

The Topix surged 8 percent to 1,292.23 at the close in Tokyo, its best gain since October 2008, after plunging 13 percent last week. The Nikkei 225 Stock Average jumped 7.2 percent to 16,022.58 as the yen weakened for a second day.

 U.S. markets rebounded on Friday to halt the longest losing streak since September. Chinese mainland markets reopen Monday after a week long holiday during which global stocks fell into a bear market.

The Topix’s 14-day relative strength index fell to 26.49 on Friday, below the level of 30 which some traders say indicates that shares will rise.

A report Monday showed Japan’s economy shrank 1.4 percent in the fourth quarter on an annualized basis, more than economists’ forecast for a 0.8 percent contraction.

All of the 33 Topix industry groups rose, led by insurers, tire makers and brokerages. Megabank Mitsubishi UFJ Financial Group Inc., which had fallen 41 percent this year through Friday, jumped 8.7 percent.

Toyota Motor Corp., the world’s biggest carmaker, added 9.6 percent as the yen weakened against the dollar. Online retailer Rakuten Inc. tumbled 1.3 percent after reporting full-year profit slumped 37 percent.

Asian Stock Market News - Fed, BOJ Awaited

Asian shares consolidate gains after rally; Fed, BOJ awaited

Japan's Nikkei

Asian shares fell on Tuesday after a four-week rally ran out of steam as investors took cover ahead of central bank meetings in the United States and Japan later in the week, while disappointing U.S. home sales weighed on the dollar.

European markets were set to open flat to lower, with earnings from major companies such as Deutsche Bank < DBKGn.DE> and Novartis (NOVN.VX) in focus.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS slipped 0.7 percent.

China's main indexes .CSI300.SSEC slid more than 2 percent at one point, pressured by concerns about weak bank profits and growing bad loans, but pared losses by early afternoon. [.SS]

Japan's Nikkei .N225 eased 0.8 percent, though it remained near a two-month high.

Even as investors moved to the sidelines after a rally that has seen regional stocks rise more than 12 percent in a month, market strategists are becoming more optimistic over the outlook for equity markets in the near term.

Risk sentiment has been supported by China's rate cut last week -- its sixth in less than a year -- and the prospect of more easing from the European Central Bank in December.

There has been speculation the Bank of Japan might expand its asset buying campaign at a policy meeting on Friday, though recent reports make it less likely.

Dealers said there was no obvious news behind the Asian stock weakness on Tuesday, though some noted tensions in South China Sea as the U.S. Navy sent a destroyer close to artificial islands built by China, drawing an angry rebuke from Beijing.

Still, some players were likely squaring positions ahead of the U.S. Federal Reserve meeting on Tuesday and Wednesday.