Nikkei climbs to 1-month high on euro zone hopes

Japan's Nikkei stock average rose to a 1-month high on Thursday on expectations that Europe will come up with measures to shore up its banks, with chip-related stocks climbing on a boost in sales for ASML Holding NV.

Shares of major exporters such as Sony Corp and Komatsu, which were sold off as fears about the European debt crisis intensified, continued to extend this week's sharp gains on tentative signs of progress by the region's policymakers.

"It appears that Europe will be able to prevent its debt crisis from spreading, and investors who had been bracing for another 'Lehman shock' are now buying back some of the assets that they sold off in recent weeks," said Takashi Ushio, head of the investment strategy division at Marusan Securities Co.

Slovakian lawmakers reached a deal to ratify a plan to bolster the European Financial Stability Facility by Friday and German Chancellor Angela Merkel said she was certain of full ratification of the fund's expansion by the Oct. 23 European Union summit.

The Nikkei benchmark climbed 1% to 8,823.25, while the broader Topix index advanced 0.7% to 758.83.

Resistance lies at 8,870, a high hit in mid-September, but market participants said it was hard to tell whether it will hold or not.

"Resistance points don't tell the complete story, because so much of the market's direction depends on the progress of the European debt plan and US earnings," said Hiroaki Osakabe, a fund manager at Chibagin Asset Management Co.

The benchmark remained solidly above its 25-day moving average at 8,638, which is considered a bullish sign and it also broke above its 50-day moving average of 8,829 for the first time since Aug. 4.

Analysts say gains could be limited ahead of more US earnings, particularly since guidance so far from companies such as Alcoa and PepsiCo has not been strong.

JPMorgan Chase & Co announces later on Thursday.

Among exporters, TDK rose 4.3% to 2,800 yen, while Panasonic climbed 2% to 756 yen. Sony added 3% to 1,562 yen and Komatsu was up 4.4% at 1,770 yen.

The yen's slide to a one-month low against the dollar also supported exporters.

Shares of camera and endoscope maker Olympus gained 4.6% to 2,482 yen after Goldman Sachs analyst Toshiya Hari upgraded the stock from "neutral" to "buy" and set a 24-month target price at 3,800 yen, compared with a previous 12-month target of 2,400 yen.

Chip-tester maker Advantest Corp jumped 5.6% to 889 yen after ASML, the world's largest producer of semiconductor lithography machines, said it expects this year's fourth-quarter bookings to beat its third-quarter bookings.

Tokyo Electron Ltd climbed 1.4% to 4,020 yen and Dainippon Screen Manufacturing Co Ltd advanced 2.5% to 577 yen.

Marubeni Corp added 2.6% to 430 yen after Barclays Capital Japan upgraded its rating on the trading company to 'overweight' from 'equal weight.' The issue has rebounded about 15% since hitting a year-low of 373 yen on Oct. 5.

Volume was relatively thin, with 1.58 billion shares changing hands on the Tokyo Stock Exchange's main board, below last week's daily average of 1.86 billion shares. Advancers led decliners 855 to 667.