5:00AM New York, 7:00PM Tokyo - US credit woes and falling commodity prices kept Tokyo stocks volatile.

Japan’s stock averages rebounded after investors looked for bargains in commodity-related stocks that have traded lower in the recent weeks.

Market Sentiment

In Tokyo trading Nikkei 225 gained 0.05% or 6.54 to 12,538.67, and the broader Topix Index rose 0.9% or 10.76 to 1,235.15.

In the first section of the Tokyo Stock Exchange 10 billion shares worth 1.1 trillion yen were traded and in the second section 367 million shares worth 4.9 billion yen changed hands.

Of the Nikkei 225 shares 160 gained, 58 declined, and 7 were unchanged. Sky Perfect JSAT led gainers in the Nikkei 225 index shares with a rise of 10.93% followed by Mazda Motor Co. rising 8.52%.

Morgan Stanley cut profit estimate for U.S. banks

Thomson Financial News reported yesterday that brokerage Morgan Stanley cut its 2008 earnings estimates on a range of large-cap banks such as Bank of America, Citigroup and JPMorgan, on concern over weaker markets and the continued deterioration of credit markets. The broker added that the earnings estimates might also be revised lower in coming weeks.

Bank of America is now expected to earn $2.97 a share in 2008, from the previous estimate of $3.75 a share, while Citigroup’s estimate was cut to $2.09 a share from $2.60 and JPMorgan was reduced to $3.18 a share from $3.40. Wachovia earnings forecast were reduced to $2.84 a share from $3.56 among other banks. On the overall, U.S. had their combined earnings estimate cut by $8.8 billion.

Muto pledges BOJ autonomy

The government’s nominee to the Bank of Japan governor’s post Toshiro Muto told a parliamentary hearing in Tokyo he will “firmly” guarantee the central bank’s autonomy.

Muto also added that rising oil prices and raw materials are hurting small companies.

Gainers & Losers

Sky Perfect JSAT led advancers in the Nikkei 225 index shares with a rise of 10.93% followed by rises in Mazda Motor Co. of 8.52%, in Okuma Corp. of 7.46%, in Fukuoka Financial of 5.99%, and in Tokai Carbon Co. of 5.88%.

Other commodity stocks gained as bargain hunters looked to invest in the sector. Sumitomo Metal Industries increased 5.81% and Sumitomo Metal Mining rose 5.33%.

Investors also bought into steel makers. Kobe Steel climbed 1.78%, while Japan Steel Works advanced 2.48% as a result.

Shipping lines gained as well. Kawasaki Kisen jumped 4.05% and Mitsui Engineering & Shipbuilding spiked 5.62%.

Ajinomoto Co. Inc led decliners in the Nikkei 225 index shares with a fall of 4.61% followed by losses in Tokyo Gas Co. Ltd of 2.98%, in Matsushita Electrical Industries of 2.74%, in GS Yuasa Corp. of 2.72%, and in NTT DoCoMo of 2.53%.

NTT DoCoMo fell after the government asked the company to reduce further its fees for fiber-optic services.

Government asks for additional fees cut

The Yomiuri news online reported today that the Internal Affairs and Communications Ministry has asked NTT Corp. to further cut the fees it charges to carriers for access to its fiber-optic network as it aims to promote further competition in the fiber-optic business.