Nikkei rises on optimism over US jobs data

Japan's Nikkei average rose on Friday helped by Wall Street's gains on expectations for a big rise in US payrolls, while a weaker yen lifted exporters.

The number of Americans filing new claims for jobless aid hit the lowest level in more than two-and-half years last week and service sector hiring picked up in February, signs the labour market recovery was quickening.

The market is now awaiting US jobless figures for February due at 1330 GMT.

With the US and European markets having rallied, analysts said Japanese stocks were attracting buying, especially exporters that have underperformed recently on short-term corrections.

"Substantial gains are expected in morning trade on hopes for good jobs data in the US, but the market may trim gains towards the close because investors remain cautious until they actually see the figures," said Shinichiro Matsushita, a market analyst at Daiwa Securities.

The median estimate is for a gain of 185,000 jobs, according to economists polled by Reuters.

"If the figure is better than expected, the Nikkei may target 11,000 next week, but if we were to expect further rallies in the Japanese market, such good sentiment for a US economic recovery has to be accompanied by a weaker yen," Matsushita said.

The euro rallied strongly to a fresh four-month high against the dollar and the yen after European Central Bank President Jean-Claude Trichet cemented expectations for a near-term interest rate rise.

The euro fetched 114.91 yen in early Asian trade after hitting a four-month high of 115.18 on Thursday.

Euro-sensitive exporters such as precision equipment makers like Nikon Corp and Canon Inc, glassmakers, as well as carmaker Mazda Motor outperformed the overall market.

Market participants said worries about turmoil in the Middle East have receded temporarily, with US crude oil futures prices edging lower on Thursday after a Venezuelan proposal for resolving Libya's crisis prompted traders to book profits despite scepticism about whether such a plan would work.

"Concern over developments in the Middle East is not over, but optimism about a US economic recovery may offset it for today," said Hiroichi Nishi, general manager at Nikko Cordial Securities.

The benchmark Nikkei rose 1.5% or 161.74 points to 10,747.76. The broader Topix gained 1.2% to 959.80.

Analysts said the Nikkei is expected to trade between 10,650 and 10,800 on Friday.

Euro-sensitive stocks posted strong gains after its rise, with Nikon Corp advancing 3.2% to 1,956 yen and Canon Inc gaining 2.3% to 3,955 yen. Carmaker Mazda Motor, which has big exposure in Europe, rose 3.5% to 210 yen.

Glassmakers, which benefit from European demand, were higher.

Asahi Glass added 2.1% to 1,135 yen and Nippon Electric Glass rose 2.5% to 1,383 yen.

Shares of Sumitomo Electric Industries surged 9.7% to 1,278 yen after the Nikkei business daily said Sumitomo has developed a rechargeable battery that promises to cost only about 10% of the price of lithium ion batteries.