Nikkei ends up 1.3 pct

They warned that the rebound could be fragile,based mostly on short-covering and with investors wary ahead of US indicators later this week,including non-farm payrolls data on Friday.

Although the situation looks good for now,a question mark remains in the market about the outlook for the global economy,said Masaru Hamasaki,a senior strategist at Toyota Asset Management.

Investors are trying to determine whether signs of a slowdown in the recovery are just a lull or point to a double-dip. That’s why the market is struggling to keep building on gains.

Earnings from BNP Paribas and HSBC topped forecasts and the US manufacturing sector grew in July for a 12th straight month,with growth slightly topping expectations. US stocks rose about 2 per cent.

This rise is difficult to trust,since it was based mainly on short-covering in thin volume. If something bad happens,the markets are likely to fall just as fast,said Yutaka Miura,a senior technical analyst at Mizuho Securities,referring to the rally on Wall Street.

The benchmark Nikkei added 123.70 points to 9,694.01 after gaining as much as 1.9 per cent,while the broader Topix rose 1 per cent to 859.18.

The dollar was flat against the yen at 86.47 yen,not far from an eight-month low of 85.95 yen hit late last week. The euro edged down 0.2 per cent after posting sharp rises against the yen the day before.

Japanese stocks are under pressure even more than their peers in Europe and the United State because investors can’t disregard worries about the strong yen’s impact on corporate earnings going forward,Hamasaki said.

On the technical front,the Nikkei’s MACD has risen closer to its zero line,with a rise above this signalling upward momentum,though its relative strength index (RSI) remains neutral at 54.

After the early bounce in the market,some selling emerged from retail and foreign investors,said Hiroaki Kuramochi,chief equity marketing officer at Tokai Tokyo Securities.

He said a large number of call options lie around 9,750,making that level a focus of investor attention.

But the benchmark will struggle to break above 9,800,a July peak that has blocked its advance several times over the past month,without some kind of strong,positive factor such as an easing of the yen,market players said.

Some 1.79 billion shares changed hands on the Tokyo exchange’s first section,staying near its lowest volume in about a week.

Advancing stocks outnumbered declining ones by 3 to 1.

TRADING FIRMS JUMP

Exporters’ shares climbed on Wall Street’s gains,with electronics parts maker Kyocera Corp gaining 1.8 per cent to 7,910 yen and chip-tester maker Advantest Corp rising 1.4 per cent to 1,912 yen.

Shares of trading houses gained after copper and oil prices surged on Monday to three-month highs,as data showing continued growth in global manufacturing eased fears of a double-dip recession.

Mitsubishi Corp jumped 4.7 per cent to 1,973 yen and Itochu Corp rose 5.6 per cent to 721 yen.

Shares of Mitsui & Co,whose unit holds a stake in BP Plc’s ruptured oil well in the Gulf of Mexico,ended up 4.4 per cent,after it said it has so far received a bill for $480 million from BP but has yet to decide if it will shoulder any clean-up costs.

Shares of Nippon Soda,a caustic soda manufacturer,surged 5.9 per cent to 325 yen after it raised its net profit forecast for the six months to September by 41 per cent to 2.4 billion yen ($27.72 million),citing a boost in sales and profits on the back of an improvement in the economy.

But the company kept its annual profit projection at 6.5 billion yen.

Nomura Holdings rose 3.7 per cent to 506 yen after Citi hiked its rating on Japan’s largest brokerage to buy/high risk,saying the stock’s fall this year has been overdone and that Nomura’s recently announced share buyback was a plus.