TOKYO (Thomson Financial) - Japanese shares are expected to open higher on Monday, buoyed by Wall Street's gains on Friday as investors welcomed Microsoft Corp's bid for Internet company Yahoo Inc.
Microsoft launched a 44.6 billion US dollar takeover offer for Yahoo in its boldest bid yet to challenge Google's dominance of the lucrative online search and advertising markets.
In a statement on Friday, Yahoo said it will 'carefully and promptly' study Microsoft's bid.
But economic worries are likely to cap the upside in Japan after the Labor Department said the US economy lost 17,000 jobs in January, marking the first contraction of the labor market in more than four years.
The news confounded economists, who were expecting 70,000 new jobs, according to Thomson/IFR.
'The January job report confirmed the job correction is spreading to the broader economy from the housing and finance sectors,' Goldman Sachs chief economist Tetsufumi Yamakawa said in a note to clients.
'The US economy is likely to post a contraction both in the January-March and April-June quarters, thereby slipping into a recession,' he said.
The Commerce Department added to the fray, reporting that construction spending dropped 1.1 percent in December -- the most in 15 months and twice what analysts expected.
In addition, uncertainty about the credit crunch is likely to weigh after rating agency Moody's Investors Service warned on a conference call Friday that it expects to downgrade some bond insurers this month.
A top rating is crucial for bond insurers to draw new business and for investors to feel secure about the bonds these companies already insure.
'The subprime loan problem may subtract some 2.0 percentage points from first half economic growth in the US,' Yamakawa said.
Amid unabated anxiety about the credit crunch, investors are also likely to closely watch the forthcoming quarterly reporting season from European financial institutions.
'Depending on the depth of concerns about bigger subprime loan-related losses at European financial institutions and ratings downgrades, and their impact on the US stock market and the foreign exchange market, the Japanese market may also resume a downturn,' Mizuho Research Institute senior economist Koji Takeuchi said.
The Dow Jones Industrial Average closed up 92.83 points or 0.73 percent to 12,743.19 on Friday, while the Nasdaq composite index advanced 23.50 points or 0.98 percent to 2,413.36.
On the Tokyo bourse, the Nikkei 225 Stock Average closed down 95.31 points or 0.7 percent at 13,497.16, while the broader Topix dropped 9.45 points or 0.7 percent to 1,336.86.
The Chicago-traded Nikkei futures contract settled at 13,800 points, up from 13,580 at the Osaka Securities Exchange on Friday and suggesting a firm start for the market.
Ahead today, the Bank of Japan will release January monetary base data ten minutes before the opening bell.
On the corporate front, Sumitomo Chemical, Mitsubishi Electric, JFE Holdings, Nippon Telegraph and Telephone and Olympus will announces earnings for April-December.
Stocks to watch include Toyota Motor Corp on a weekend report that the automaker is considering building an eighth Chinese assembly plant to boost annual local output to 1 million units.
JFE Holdings Inc may fall on a report that steel maker will book about 50 billion yen in extraordinary losses from its garbage-treatment plant business and may issue a profit warning for the year to March 2008.
Sharp Corp may be actively traded on a report that its operating profit rose 5.5 percent to a record 51.99 billion yen in the fiscal third quarter to December, buoyed by strong sales of its flat TVs, and left its full year to March profit forecasts unchanged.
(1 US dollar = 106.50 yen)
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