* Investors shift to developed markets from emerging markets
* Futures-led buying lifts Tokyo shares -analyst
* Investors' focus shifts to U.S. economy from Egypt
By Ayai Tomisawa and Antoni Slodkowski
TOKYO, Feb 2 (Reuters) - Japan's Nikkei average was on track
for its biggest daily jump in two and a half months on Wednesday
after global markets rallied on strong manufacturing data, robust
U.S. earnings and easing concerns on the Middle East.
The Nikkei's rise exceeded the expectations of many analysts
as global macro hedge funds were detected short-covering through
large purchases of Nikkei futures, investors said.
Strong earnings from delivery firm UPS Inc <UPS.N> and
drugmaker Pfizer <PFE.N> and solid manufacturing data gave
investors confidence in the future profitability of the corporate
sector and lifted Wall Street to its highest since June 2008.
[]
But traders were also closely watching movements in the yen,
which was near one-month highs against the dollar and could put
pressure on exporters.
"Yesterday's demonstration in Egypt ended relatively
peacefully and the cost of insuring against a default by Egypt
has decreased, showing investors are a calming down a little,"
said Norihiro Fujito, a senior investment strategist at
Mitsubishi UFJ Morgan Stanley Securities.
Embattled Egyptian President Hosni Mubarak said on Wednesday
he would not seek re-election on a ballot due in September but
many analysts said that may not be enough for many protesters who
want him to leave immediately. For more see [] and
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The benchmark Nikkei <> was up 1.9 percent or 193.64
points at 10,468.14.
At one point it rose as high as 10,479.75, beyond resistance
at 10,470.13, the settlement price for the Nikkei 225's options
settlement.
The broader Topix <> added 1.8 percent, to 930.19.
Fujito said the U.S. manufacturing data was the strongest
since May 2004, when it was followed by interest rate hikes
within a month and then more hikes later.
"But this time, with high unemployment, the hike may happen
around April next year," said Fujito, adding that increased
liquidity is helping markets rally.
The U.S. manufacturing sector expanded in January, and
prices paid jumped more than expected, according to an industry
report released on Tuesday.[]
Market participants also said foreign investors have been
shifting to developed markets such as the United States from
emerging markets like China.
"The biggest economy in the world is growing faster than
people had expected. The U.S. economy's strength is far more
important to the Japanese market than worries about political
instability in the Middle East," said Stefan Worrall, director of
equity cash sales at Credit Suisse.
Although a surge in oil prices suggests worries persist about
increased political risk in the Middle East, excessive concern
about stability in the region has passed with relief that the
turmoil in Egypt does not appear to be escalating, analysts
added.
EARNINGS SEASON
This week marks the peak in Japan's corporate results season
for the October-December quarter, with investors looking for
signs of a sustained recovery at blue-chip firms.
Daiwa Securities <8601.T>, Japan's No.2 brokerage, jumped 5.4
percent to 429 yen after it reported its first profit in four
quarters on Tuesday, as a rebound in Japanese share prices lifted
fees from stock trading. []
Casio Computer <6952.T> led the advance in the Nikkei,
surging 7.0 percent to 661 yen after it entered the black on an
operating basis for the April-December period.
Casio, a leading digital watchmaker, said it posted an
operating profit of 9 billion yen ($110.6 million) compared with
an operating loss of 20.4 billion yen in the same period a year
earlier.
The dollar, which saw safe-haven bids late last week when the
protests in Egypt intensified, fell broadly as risk appetite
returned, hovering near a four-week low in Asian morning trade at
81.45 yen <JPY=>.
But analysts said the Nikkei would brush off a stronger yen,
as it would still be weaker than many firms' conservative
estimates for the business year to March 2011, and concerns about
the strong yen may be erased if U.S. jobs data due out this
Friday proves strong.
(Additional reporting by Tokyo newsroom; Editing by Michael
Watson)
