Nikkei gains but loses steam on yen, economy worry

                                
 * Nikkei up 1.2 pct, earlier rose nearly 2 pct
                                
 * Large number of call options around 9,750 - analyst
                                
 * But 9,800 resistance to hold as profit-taking emerges
                                
 * Doubts about further growth outlook, yen weigh -strategist
                                
 By Aiko Hayashi and Elaine Lies
                                
 TOKYO, Aug 3 (Reuters) - Japan's Nikkei average rose 1.2
percent on Tuesday, helped by broad buying on easing worries
about the global economic recovery after strong European bank
results helped to send Wall Street to a 10-week closing high.
                                
 But worries about a further improvement in the global
economy and the yen's strength limited further gains, market
players said.
                                
 They warned that the rebound could be fragile, based mostly
on short-covering and with investors wary ahead of U.S.
indicators later this week, including non-farm payrolls data on
Friday.
                                
 "Although the situation looks good for now, there remains a
question mark 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 <BNPP.PA> and HSBC <HSBA.L> topped
forecasts and the U.S. manufacturing sector grew in July for a
12th straight month, with growth slightly topping expectations.
U.S. stocks rose about 2 percent. [ID:nN02170396]
                                
 The benchmark Nikkei <.N225> added 116.68 points to 9,686.99
after gaining as much as 1.9 percent, while the broader Topix
<.TOPX> rose 0.9 percent to 858.71.
                                
 The dollar was flat against the yen at 86.40 yen <JPY=>, not
far from an eight-month low of 85.95 yen hit late last week. The
euro <EURJPY=R> edged down 0.1 percent after posting sharp rises
against the yen the day before.
                                
 "Japanese stocks are under pressure even more so than their
peers in Europe and the United State because investors can't
wipe out 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 signaling upward
momentum, though its relative strength index (RSI) remains
neutral at 53.
                                
 "The bounce today may already have run out of steam, with
some selling emerging from retail and foreign investors," said
Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo
Securities.
                                
 Kuramochi 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.
                                
 TRADING FIRMS JUMP
                                
 Exporters' shares climbed on Wall Street's gains, with
electronics parts maker Kyocera Corp <6971.T> gaining 1.8
percent to 7,910 yen and chip-tester maker Advantest Corp
<6857.T> rising 2.1 percent to 1,925 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. [COM/WRAP] [ID:nN02170396]
                                
 Mitsubishi Corp <8058.T> jumped 4.6 percent to 1,971 yen and
Itochu Corp <8001.T> rose 5.1 percent to 718 yen.
                                
 Shares of Mitsui & Co <8031.T>, whose unit holds a stake in
BP Plc's <BP.L> <BP.N> ruptured oil well in the Gulf of Mexico,
were up 4.1 percent, even though it said it has received a bill
for $480 million from BP. [ID:nTFD006503]
                                
 Shares of Nippon Soda <4041.T>, a caustic soda manufacturer,
surged 5.9 percent to 325 yen after it raised its net profit
forecast for the six months to September by 41 percent 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 <8604.T> rose 4.3 percent to 509 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.
[ID:nTOE66R04W]
 (Editing by Michael Watson)