Tokyo stocks open up 1.27% on bargain-hunting after recession rout

Passers-by are reflected on an electronic stock quotation board outside a brokerage in Tokyo, on Nov 17, 2014. -- PHOTO: REUTERS
Passers-by are reflected on an electronic stock quotation board outside a brokerage in Tokyo, on Nov 17, 2014. -- PHOTO: REUTERS

TOKYO (AFP) - Tokyo stocks opened 1.27 per cent higher on Tuesday on bargain-hunting after sliding a day earlier as weaker-than-expected domestic figures showed Japan had slumped into recession.

The Nikkei 225 index at the Tokyo Stock Exchange, which tumbled 2.96 per cent on Monday, was up 215.04 points at 17,188.84 in the first minutes of trading.

"The Monday market selloff was a natural reaction to truly poor economic numbers," says Mr Shunichi Otsuka, general manager of research and strategy at Ichiyoshi Securities.

The government said on Monday the world's number three economy shrank 0.4 per cent in the July-September quarter, or an annualised rate of 1.6 per cent, marking the second straight quarter of contraction.

The technical recession, a huge blow to Tokyo's bid to turn around laggard growth, makes it almost inevitable that Prime Minister Shinzo Abe will delay a sales tax hike due next October and call snap elections for next month.

"Investors now overwhelmingly expect the government to dissolve the lower house of parliament and put off the 2015 consumption tax hike," Mr Otsuka told Dow Jones News Wires.

"Since economic policies to this point have clearly not worked, a viable strategy from the government that will work is awaited before more bets on stocks are made," he said.

In New York, huge takeovers in the oil and pharmaceutical sectors helped lift the S&P 500 to a record Monday, while the Dow fell shy of a new mark.

The S&P 500 rose 0.07 per cent to 2,041.32, edging above a record set Friday, while the Dow gained 0.07 per cent to 17,647.75, narrowly missing a record.

The US dollar was at 116.67 yen in early Tokyo trading against 116.63 in New York late Monday.