RTTNews - The Japanese benchmark Nikkei index cruised past the 10,000 mark and hit a new 8-month high in early trading Thursday even as the country's economy shrank in the first quarter at its fastest pace since World War Two.

However, after the initial surge, the Nikkei is now drifting lower, with investors turning cautious and taking profits at a few front line counters. At 9,962, around 60 points down from a high of 10,022.23 it had hit earlier in the day, the Nikkei is currently down nearly 30 points or 0.3% from its previous close.

The benchmark index had ended stronger by 205 points or 2.09% at 9,991 on Wednesday on the back of some hectic buying in resource-related stocks and on a weaker yen.

According to a report from the Ministry of Finance, Japan's economy shrank less than initially reported in the first quarter of 2009. The pace of contraction, however, was still fairly severe. The country's gross domestic product fell a price-adjusted 3.8% on quarter, or 14.2% in annualized terms, revised GDP data released by the Cabinet Office showed.

That was better than the initial estimate made three weeks ago of a 4.0% on-quarter, or 15.2% annualized, fall. Capital spending was revised up to an 8.9% on-quarter fall from a preliminary 10.4% drop.

Buoyed by rising crude oil and gasoline prices, shares of almost all major oil firms, including Nippon Oil and Showa Shell Sekiyu moved up this morning on expectations of higher earnings in the current quarter.

Shares of Toyota Steel Manufacturing Co. are in demand on rising scrap steel prices at home and abroad on stepped-up Chinese buying of such materials. The stock is currently trading nearly 6% up. Shares of other steel majors including JFE Holdings, Kobe Steel and Sumitomo Metal Industries are also trading firm.

The non-ferrous metals space is seeing some sell-off today. Machinery and automobile stocks are also seen exhibiting weakness.

Among bank stocks, Sumitomo Mitsui Financial, Sumitomo Trust and Banking, Chiba Bank, Mitsubishi UFJ Financial, Fukuoka Financial Group and Shinsei Bank are trading with notable gains. Mizuho Financial, Bank of Yokohama and Mizuho Trust & Banking are also trading in positive territory. Resona Holdings is down with a modest loss.

Bic Camera Inc. is expected to report around 9.3 billion yen in group pretax profit for the nine months ended May 31, a 31% drop from the same period a year earlier, because of sluggish consumer spending. Operating profit is expected to have dropped 33% to 8.7 billion yen, but was helped by a higher sales ratio of highly profitable refrigerators, washing machines and other eco-point appliances in May.

For the full fiscal year, the company projects that pretax profit will drop 25% to 12.4 billion yen on 8% higher revenue at 582 billion yen, with upward revisions possible if sales of eco-point TVs and refrigerators remain strong after June. The stock, however, is trading in positive territory with a sharp gain of 4.65%.

In the currency market, the yen is trading at 98.01 to the U.S. dollar. Earlier this morning, the U.S. dollar traded at the lower 98-yen level in Tokyo, slightly higher than its levels overnight in New York. At 9 a.m., the dollar fetched 98.20-25 yen against 98.07-17 yen in New York and 97.60-62 yen in Tokyo at 5 p.m. Wednesday. In New York, the dollar was bought on expectations for higher interest rates in the United States, with some traders on the sidelines ahead of a Group of Eight finance ministers meeting in Italy later in the week.

Among other markets in the Asia-Pacific region, Australia is trading modestly higher. The Korean market is trading flat while Shanghai, Hong Kong, New Zealand, Singapore and Taiwan are all trading weak.

On Wall Street, the Dow closed down 24.04 points at 8,739.02 on Wednesday, weighed down by fears of inflation and the slow pace of economic recovery. The Nasdaq closed down 7.05 points at 1,853.08 and the S&P 500 eased by 3.28 points to 939.15.

Major European markets closed Wednesday's session moderately higher. The U.K.'s FTSE 100 Index closed up by 0.7 percent, while the French CAC 40 Index and the German DAX Index finished up by 0.6 percent and 1.1 percent, respectively.

Crude oil finished above US$71 per barrel at its highest level in almost eight months on Wednesday. Traders mulled Energy Information Administration data that showed a decline in crude oil and gasoline inventories last week. Light sweet crude for July delivery finished at US$71.33, up US$1.32 for the session. Prices reached as high as US$72.43 in mid-morning trading.

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