Nikkei gains 0.57% but gains capped ahead of key U.S. jobs data

Tokyo stocks rose Friday, with the key Nikkei stock index extending gains for the third straight day as positive housing and employment data from the U.S. lent further support to the market and spurred short-covering.

Gains were limited however as brokers highlighted the fact that many investors had hit the sidelines on the last trading day of the week ahead of a key U.S. nonfarm payrolls report for August, due out later on Friday.

The market has been boosted by better-than-expected manufacturing activity in the U.S. and rising GDP in Australia. China's robust industrial output has also lifted investor sentiment of late, but analysts maintain that caution still remains about the health of the world's largest economy.

"Sentiment is not exactly bullish, given a still very slow recovery in the United States, but recent figures such as the solid ISM (manufacturing) data seem to indicate that a double-dip recession will likely be avoided," said Junichi Misawa, a senior fund manager at STB Asset Management.

"Stocks and currencies had up until now largely factored in negative scenarios, so further linear slides in stocks are unlikely."

Investor jitters still remain however and strategists said that bold moves were not an option ahead of the U.S. jobs data, although conceded there was a sense of relief in the market following a string of positive closes.

"Investors are kind of relieved because a downward spiral in the global economy had a pause this week," said one Tokyo-based asset manager.

"But investors won't jump into buying shares just because of that, since there is still a strong sense of uncertainty."

The 225-issue Nikkei Stock Average advanced 51.29 points, or 0. 57 percent, from Thursday to 9,114.13, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange was up 4.28 points, or 0.52 percent, to 823.70.

Weekly jobless claims in the U.S. released overnight came in better than expected and pending sales of existing U.S. houses climbed 5.2 percent in July, figures from the National Association of Realtors showed Thursday.

The figure beat the median estimate for a one percent drop and helped lift the market mood on Friday.

In addition, same-store sales at U.S. retail chains are expected to rise, further easing fears about the U.S. economic outlook and wider fears about the possibility of a double-dip.

"The excessive pessimism about the U.S. economy is coming to a halt," said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc, adding "the market was totally pessimistic, but a ray of sunlight has come out this week."


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