Tokyo paces Asian stock gains, Mumbai shares drop

By V. Phani Kumar, Matthew Allen and Leslie Shaffer

HONG KONG (MarketWatch) -- Asian markets ended mostly higher Wednesday, with Japanese stocks charging ahead as solid corporate earnings from Canon put some extra gloss on the already better outlook for exporters.

Chinese stocks also jumped after the central bank said there was little risk of a "double-dip" recession while Sydney shares were paced on hopes the Reserve Bank of Australia won't increase rates after consumer prices rose less than expected.

China's Shanghai Composite climbed 2.3% to finish at a two-month high, Australia's S&P/ASX 200 added 0.7%, South Korea's Kospi advanced 0.3%, Taiwan's Taiex rose 0.5% and Hong Kong's Hang Seng Index gained 0.6%. India's Sensex defied the broad trend to decline 0.5% in afternoon trade.

Japan's Nikkei Stock Average was the best performer of the region, surging 2.7% as Canon /quotes/comstock/13*!caj/quotes/nls/caj (CAJ 43.07, +0.83, +1.97%) (JP:7751 3,550, +40.00, +1.14%) soared 5.7% on the back of its quarterly results Tuesday to clinch its biggest single-day percentage rise since Dec. 24.

Dow Jones Industrial Average (DJIA 10,459, +71.78, +0.69%) futures climbed 15 points in screen trade to 10,509.00.

"We're really starting to see buying from earnings optimism, starting with Canon and Sony," said Masayoshi Yano, a senior market analyst at Meiwa Securities in Tokyo.

Other Japanese electronics makers also jumped after Canon reported Tuesday that its April to June net profit surged four-fold from the year earlier due to brisk sales of digital cameras and printers. Sony Corp. /quotes/comstock/13*!sne/quotes/nls/sne (SNE 29.81, +0.41, +1.39%) (JP:6758 2,482, +24.00, +0.98%) rose 2.7% and Nikon Corp. (NINOY 171.75, +0.25, +0.15%) (JP:7731 1,390, -13.00, -0.93%) gained 3.2%.

Yahoo Japan /quotes/comstock/11i!yamhf (YAMHF 13.97, -0.23, -1.62%) (JP:7272 1,188, +12.00, +1.02%) fell 3% despite 13% growth in net profit for the first quarter ended June 30, after the stock rose 6% in the past three sessions. Nomura Securities said that while the earnings were mostly in line with expectations, earnings visibility was a bit more uncertain after revenue for display ads was slightly below the brokerage's estimate.

Yahoo Japan also confirmed plans to team up with Google to use the U.S. giant's search engine technology. Yahoo Inc. said its own plans to roll out a global search alliance with Microsoft Corp. wouldn't be affected by affiliate Yahoo Japan's decision to tie up with Google.

Banks across the region advanced after their European and U.S. peers rose on better-than-expected second-quarter earnings from UBS and Deutsche Bank. The sector also continued to get a fillip from news Tuesday the latest update of the "Basel III" rules on their capital requirements won't be as tough as anticipated.

In Tokyo, Mizuho Financial Group /quotes/comstock/13*!mfg/quotes/nls/mfg (MFG 3.15, +0.03, +0.93%) (JP:8411 131.00, +1.00, +0.77%) added 2.9% and Mitsubishi UFJ Financial Group (JP:8306 402.00, +1.00, +0.25%) /quotes/comstock/13*!mtu/quotes/nls/mtu (MTU 4.85, +0.04, +0.82%) jumped 3.6%. Shinhan Financial Group /quotes/comstock/13*!shg/quotes/nls/shg (SHG 74.53, +1.76, +2.42%) gained 1.4% in Seoul, National Australia Bank /quotes/comstock/22x!e:nab (AU:NAB 24.84, +0.89, +3.72%) /quotes/comstock/11i!nabzy (NABZY 22.96, +0.83, +3.75%) rose 1.5% in Sydney and HSBC Holdings /quotes/comstock/22h!e:5 (HK:5 78.30, +0.10, +0.13%) /quotes/comstock/13*!hbc/quotes/nls/hbc (HBC 51.25, +0.79, +1.57%) climbed 2.6% in Hong Kong.

But Indian financial stocks were broadly lower amid concern the central bank might continue to aggressively raise interest rates in coming months. ICICI Bank /quotes/comstock/13*!ibn/quotes/nls/ibn (IBN 44.77, +0.35, +0.79%) fell 1.5% and Axis Bank fell 2.4%, while Housing Development Finance Corp. dropped 0.5%. Read full story on impact on bank shares from rate hike concerns.

The market was also weighed as shares of heavyweight Reliance Industries dropped 2.5%, although the energy and petrochemicals major reported a 32% growth in quarterly net profit on Tuesday. The drop came on worries about a slow ramp-up of natura-gas production from a field on India's east coast, with Goldman Sachs analysts saying the company may not be able to increase output from the field "for the next two quarters owing to bottleneck in the pipeline infrastructure."

Australian shares recovered from a knee-jerk drop immediately after data showed the country's consumer inflation for the second quarter came in weaker than expected to end higher, on hopes the RBA might not increase interest rates at its meeting next week.

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