The stock market in Japan opened on a positive note this morning on strong cues from Wall Street but has shed a significant portion of its gains in subsequent trading with investors choosing to take some profits.

After a firm start, Japan's benchmark index Nikkei 225 rallied higher as pharma, bank and automobile sectors saw some hectic buying in early trading today. The benchmark, which rose to 8,841, is currently trading at 8,777, up 68.64 points over its previous close.

Shares of Chugai Pharmaceutical Co. jumped Monday morning as speculators reacted to the overseas outbreak of swine flu by snapping up the stock of the company, which makes infectious-disease drugs. A little while ago, Chugai was up more than 17%, while shares of Shikibo Ltd. and Daiwabo Co., which both make protective masks, remained bid-only.

Construction, foods, chemicals and pharmaceuticals stocks are trading firm with sharp gains.

Oil stocks Nippon Oil, Showa Shell Sekiyu and Nippon Mining Holdings Inc are trading weak. Steel and machinery stocks are trading mixed.

Among automotive stocks, Toyoto Motor, Hondo Motor, Fuji Heavy Industries and Nissan Motor are up with impressive gains. Mazda Motor, Mitsubishi and Suzuki Motor are trading marginally higher.

Bank stocks are trading mostly higher this morning. Shares of securities and insurance firms are also trading up. Real estate, communications, power and gas stocks are in demand. Services stocks exhibit a mixed trend.

The Yen is trading at 96.99 to the U.S. dollar, marginally down from its previous close of 97.02.

Among the other stock markets in the Asia-Pacific region, Australia is trading with handsome gains. New Zealand and South Korea too are trading higher. Singapore's benchmark Straits Times index is down with a sharp loss of 2.4%.

In a significant development, the Japanese government has cut its economic forecast for fiscal 2009 to a postwar-worst contraction of 3.3 percent from the earlier predicted zero growth, as the deepening global economic slump has continued to undermine its economy. The Cabinet Office downgraded the estimate for the current fiscal year, which began earlier this month, with the economy deteriorating at an unprecedented speed, particularly since the later half of fiscal 2008.

Revision of forecast normally happen in the summer or fall of the year concerned, but the government has done it at a very early stage of the fiscal year now. ''In addition to sharp declines in exports and production, private consumption has been weakening,'' the office said in its latest economic estimation. The fiscal 2009 economy ''will have to get started at a low in negative territory which has never been seen before.''

For fiscal 2008 that ended March 31, the Cabinet Office said the economy is likely to have shrunk 3.1 percent, a bigger contraction than its previous estimate of a fall of 0.8 percent. For fiscal 2009 through next March, it expects exports to plunge record 27.6 percent from the previous year, instead of a 3.2 percent drop it projected in December.

The government's economic stimulus measures are likely to generate about 200,000 more jobs in fiscal 2009, it said, but added that the jobless rate would rise to 5.2 percent in the period, up from 4.1 percent in fiscal 2008.

The Bank of Japan is also widely expected to revise downward its GDP forecast for fiscal 2009 in its economic outlook report to be adopted at a policy meeting Thursday.

Wall Street closed with strong gains on Friday as participants stepped up buying on hopes the economic downturn may be slowing. Better-than-expected new home sales and durable goods orders aided sentiment to an extent.

According to a report from the Commerce Department, new home sales saw a modest rise in March, although the annual rate of new home sales came in well above economist estimates due to an upward revision to February sales. The report showed that new home sales fell 0.6 percent to an annual rate of 356,000 in March from a revised February rate of 358,000. Economists had expected new home sales to remain unchanged compared to the 337,000 originally reported for the previous month.

Earlier, a separate report from the Commerce Department showed that durable goods orders fell 0.8 percent in March following a downwardly revised 2.1 percent increase in February. Economists had expected orders to fall 1.5 percent.

The street's real focus was on the details of the government's measures with regard to a series of stress tests at 19 leading U.S. banks. Though actual results from the tests will be available after May 4, investors hoped to gain insight into the conclusions that government officials reached. The report acknowledged that most U.S. banking organizations currently have capital levels well in excess of the amounts required to be considered well capitalized. Meanwhile, Fed regulators generally assert that banks should be prepared for the worst.

American Express and Ford reported better-than expected earnings. Earnings will remain in focus on Monday with a lot more companies confirming that they well announce their latest quarterly results before commencement of trading.

Ford reported an after-tax net loss of $0.75 per share, but analysts expected a loss of $1.23 per share. While the loss continues to indicate weakness in the auto sector, the better-than-expected result shows that improvements are being made at Ford.

Meanwhile, Microsoft's (MSFT) third quarter earnings met expectations after excluding special charges. The software giant reported third quarter earnings of $0.33 per share, including two charges that reduced earnings by $0.06 per share, while analysts had expected Microsoft to earn $0.39 per share.

June crude oil rose throughout the session. A weak dollar and interest in equities led the crude contracts to close at $51.54 per barrel, up 3.9%.

The Dow ended 119 points up. The Nasdaq moved up 42 points and the S&P 500 index gained 14 points.

In the Asia-Pacific region, most of the markets closed mostly lower on Friday. Japan's benchmark Nikkei 225 fell 1.6%. Hong Kong's Hang Seng index bucked the downtrend and edged up by 0.3 per cent.

Major European markets ended Friday's session near their highs of the day, with the U.K.'s FTSE 100 Index closing up 3.4 percent, while the French CAC 40 Index and the German DAX Index rose 3.1 percent and 3.0 percent, respectively.

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