Japanese stocks recoup some losses [Updated]
Japanese stocks rebounded early Wednesday after Tuesday’s dive, although analysts said the bounce, in part, reflected “short covering” by traders who had bet on a market slide and were taking profits.
The Nikkei 225 share index was up 377 points, or 4.4%, to 8,985 at 7 p.m. PDT, shortly before the midday break. The index was up as much as 6.5% earlier.
[Updated at 11:45 p.m. PDT: The Nikkei closed up 488 points, or 5.7%, to 9,093, recouping less than half of what it lost the day before.]
The Nikkei had plummeted 1,015 points, or 10.6%, on Tuesday, the worst one-day decline since the global financial crisis in October 2008, after the Japanese government warned of rising meltdown risk at the crippled Fukushima nuclear reactor complex.
On Wednesday the situation remained grave at Fukushima, as authorities said about 70% of one reactor's fuel rods had been damaged since Friday's earthquake and tsunami, The Times’ Carol J. Williams reported.
Still, some investors and traders may have decided to hunt for bargains, with the Nikkei index at its lowest level in nearly two years after four straight days of losses.
Short-covering trades also were lifting stocks, analysts said.
"The rebound is pretty strong as investors realized they may have panicked a bit too much yesterday," Fujio Ando, senior managing director at Chibagin Asset Management, told Reuters. "But it's mostly short covering by both domestic and foreign players, and not honest, active buying, because nuclear worries are still strong."
In a short sale a trader borrows stock and sells it, betting the market price will drop. If the bet is correct the trader can buy new shares at lower prices to replace the borrowed stock and pocket the difference between the sale price and the repurchase price.
U.S. stocks ended Tuesday with relatively modest losses despite the selloff in Tokyo. The Dow Jones industrial average was off 137.74 points, or 1.2%, to 11,855.42.
Go here for updates on stock market indexes in Japan and across Asia.
-- Tom Petruno