* Nikkei up on short-covering in thin trade after Monday fall
* Support seen solid at 10,100, near 25-day moving average
* Commodities-linked shares down after metals, oil drop
* Shanghai shares edge up briefly, cheering investors
By Elaine Lies
TOKYO, Aug 18 (Reuters) - Japan's Nikkei stock index clawed
back from its lowest close in almost two weeks on Tuesday as
short-covering emerged, with investors encouraged as Shanghai
shares edged higher after tumbling the previous day.
Mitsubishi Corp <8058.T> and other trading houses lost ground
after commodities fell on growing doubts about economic recovery,
though this was countered by gains in defensive shares -- seen as
resilient in the face of economic uncertainty -- such as
telecommunications and retailers.
But the big focus was China after shares there plunged 5.8
percent on Monday. The Shanghai Composite Index <> drifted
in early trade, swinging from positive to negative territory.
Tokyo analysts were a bit sceptical about how much weight
should be placed on Chinese share movements, noting that sharp
gains in global markets last week had primed them for
profit-taking.
"There is a bit of concern in markets about whether the
positive impact of various government stimulus programmes hasn't
already peaked out and whether the signs of economic recovery can
be sustained into 2010," said Hiroaki Osakabe, a fund manager at
Chibagin Asset Management.
"Mainly, though, everyone was looking for a good time to take
profits after the recent gains -- and China provided the reason."
On Monday, Shanghai shares closed down 176.342 points at
2,870.630, extending last week's 6.6 percent drop. They were down
0.2 percent by the end of morning trade in Tokyo.
U.S. stocks fell the most in seven weeks on Monday after a
sell-off in major Asian markets fed into a drop in European
stocks, with a disappointing outlook from retailer Lowe's Cos
<LOW.N> stoking worries about weak U.S. consumer spending.
"I think macroeconomic indicators in general suggest things
are improving globally and there's no reason to be so
pessimistic, but there's not a lot we can do about market
sentiment as long as stocks keep on falling," said Noritsugu
Hirakawa, a strategist at Okasan Securities.
"If Shanghai manages to stabilise above 2,800, I think the
Nikkei will rise a bit, mainly on short-covering."
The benchmark Nikkei <> had gained 0.4 percent or 38.80
points to 10,307.41 by the midday break. It closed at 10,268.61
on Monday after falling 3.1 percent, its biggest one-day
percentage fall in nearly five months.
The broader Topix <> gained 0.1 percent to 950.46.
WATCHING SUPPORT
Market analysts said they expected support to hold for the
benchmark Nikkei <> around 10,100, or just a bit above the
25-day moving average, which currently comes in around 10,038.
Little impact is expected from the start of campaigning for
an Aug. 30 election for Japan's lower house of parliament, which
polls show the opposition Democrats have a good shot at winning.
"This will be neutral for the market at this point, although
the start of the campaign means we have a bit of a political
vacuum, which can't be said to be good," said Kenichi Hirano,
operating officer at Tachibana Securities.
Sumitomo Mitsui Construction <1821.T> and IHI Corp <7013.T>
gained after a report in the Nikkei business daily that the two
firms had won a 40 billion yen order to build a bridge in
Vietnam.
Sumitomo Mitsui, a general contractor, soared 8 percent to
108 yen and IHI, a heavy machinery maker, gained 1.7 percent to
177 yen.
Casio Computer Co Ltd <6952.T> jumped 5.8 percent to 788 yen
after Credit Suisse lifted its rating to "outperform" from
"underperform", saying the brokerage expects an earnings recovery
in the firm's loss-making businesses including mobile phone
handsets.
"We believe Casio shares offer a very good investment
opportunity amid ongoing strong market skepticism about an
earnings recovery," Credit Suisse analyst Koya Tabata wrote in a
research note.
But trading companies lost ground as metals and oil prices
fell on Monday, with Mitsubishi Corp, Japan's largest trader,
losing 2.2 percent to 1,880 yen.
Mitsui & Co <8031.T> fell 1.8 percent to 1,219 yen and Itochu
Corp <8001.T> lost 1.8 percent to 655 yen.
Trade was thin, with 889 million shares changing hands on the
Tokyo exchange's first section compared with last week's morning
average of 932 million.
Declining shares outpaced advancing ones, 884 to 613.
(Reporting by Elaine Lies; Editing by Chris Gallagher)
