6:30AM New York, 7:30 PM Tokyo – Steel stocks lift bearish mood in Tokyo trading.

Election win of the upper house in Japan election and worries related to volatility in riskier bonds dominated market opening in Tokyo. The index in the first 2 hours of trading fell nearly 1.5% but recovered later in the afternoon trading. Better than expected results from the steel companies helped the index to recover most of the losses and close 5.5 to 17,289.30.

Liberal Democratic Party lost its control of the upper house to Democratic Party on voters concerns that the Prime Minister Abe is disconnected with the voters concerns. The fall out of mismanagement of the pension account records, contradictory statements from now resigned Defense Minister added to the voters’ nervousness. Prime Minister Abe has vowed not to resign in the wake of his party’s loss but his legislative agenda will have to change now that he has lost control of one of the two houses.

JFE Holdings reported net income jumped 63% on revenue gain of 14.4% to 791 billion yen. The company reported net income of 89.5 billion yen at the end of the first quarter as of June 30th. The company raised its forecast for the interim dividend per share to 70 yen from 50 yen. The company also revised up the annual revenue forecast by 8.6% and net income by 6.8% for the fiscal year ending March 2008.

Nippon Steel reported first quarter revenue jump of 18.3% and earnings gain of 16%. The revenues in the quarter were recorded at 1.1 trillion yen and earnings at 86.7 billion yen. Earnings per share in the quarter rose to 13.7 yen from 11.26 yen from a year ago.

According to the company press release inventory to shipment ratio in the industry rose at the end of May to 108.5% from 106.8%.

Mitsubishi Electric reported first quarter earnings gain of 87% to 46.5 billion yen on net revenue gain of 6% to 872.7 billion. Home Appliance segment reported revenue rise of 15% to 238 billion yen and operating earnings of 18.5 billion. Energy and Electric systems revenue jumped 17% to 195.4 billion and operating earnings of 13.3 billion yen. Industrial automation division revenue increased 4% to 239.7 billion and operating income 37.8 billion yen. Earnings per share jumped to 21 yen from 11 yen a year ago.

The company raised forecast for the first half of the fiscal year ending in March 2008 to 1.9 trillion yen from 1.85 trillion yen and net income by 42% to 80 billion yen from 57 billion yen.

The stock traded to a record level on the news with a gain of 10% to 1,265.

The worries related consumer spending in the U.S. hurt the export driven stock after a week of turmoil in the market. Canon closed 2.6% lower at 6,340 and Sony lost 1.1% to close at 6,350 yen. Seiko Epson plummeted 11% to 3,410 yen on broker downgrade.

The strength in the Japanese steel companies lifted other steel stocks in the region. Posco in Korea increased 2.2% and Baoshan Iron & Steel surged 7%.

Shipping companies staged another rebound on the expectations that the shipping rates will increase lifting the shares of Mitsui OSK by 4%.