* Spain downgrade not a surprise, factored in - analyst
* Nikkei on track for worst monthly fall since Oct 2008
By Shinichi Saoshiro
TOKYO, May 31 (Reuters) - Japan's Nikkei average edged up 0.6
percent on Monday, bouncing back from earlier losses and headed
for its fourth straight day of gains as fears over the European
sovereign debt crisis continued to show signs of receding.
The yen continued drifting down from its recent peak, helping
the bounce by the Nikkei <>.
A number of exporters including Canon Inc <7751.T> gained as
the yen fell back against the dollar and the euro, with market
players saying investors were bargain-hunting on any dips in
share prices.
"The Nikkei looks oversold around the current level if the
fiscal crisis in Europe is to be contained. The markets have been
relatively calm since late last week, paving the way for the
Nikkei to consolidate and attempt a self-sustained rebound," said
Masaru Hamasaki, a senior strategist at Toyota Asset Management.
Fitch cut Spain's credit rating by one notch on Friday,
saying its economic recovery will be more muted than the
government forecast due to its austerity measures. The downgrade
helped send Wall Street lower ahead of a three-day weekend.
[] []
Market players said however the impact of the rating cut on
the broader market was limited for now, noting that many analysts
had expected the move and only the timing was a surprise.
"While Fitch did cut Spain's rating, S&P did the same thing
in April, so it's not as if the move was all that new," said
Takashi Ushio, head of the investment strategy division at
Marusan Securities.
"There's the sense that the Nikkei may be about to start a
bit of a rebound. It's held up quite well even though Wall Street
fell. But gains will definitely be capped around 10,000 for now,"
Ushio said.
The benchmark Nikkei <> rose 53.49 points to 9,816.47
after hitting 9,728.42 while the broader Topix <> rose 0.7
percent to 884.98.
The Nikkei has lost 12 percent during May as of the end of
trade on Friday, putting it on track for its worst one-month
performance in well over a year.
But technical indicators are starting to point tentatively
towards a possible rebound, with the Nikkei's relative strength
index (RSI) climbing above 30 late last week. Anything under 30
is considered oversold.
The Nikkei's MACD has also stopped falling and appears to be
inching upwards.
The euro rose 0.8 percent against the yen to 112.69 yen
<EURJPY=R> while the dollar rose 0.5 percent against the yen to
91.50 yen <JPY=>, a 10-day high. []
Canon <7751.T> rose 1.2 percent to 3,785 yen.
Honda Motor Co <7267.T> edged up 0.7 percent to 2,797 yen. It
said it expected production at a China parts plant, the centre of
a labour dispute, to resume on Monday. []
LENDERS DROP
Shares of Promise Co <8574.T> dropped 5.6 percent to 596 yen,
their lowest intraday level since Dec. 21, after losing 1.6
percent on Friday. Selling continued after Moody's Investors
Service downgraded the consumer lender's credit ratings by two
notches, highlighting the severe business environment for the
industry.
Trading houses slid after metals prices fell on Friday in the
wake of the Spain ratings cut.
Mitsubishi Corp <8058.T> shed 0.3 percent to 2,067 yen and
Mitsui & Co <8031.T> lost 1.4 percent to 1,302 yen.
(Additional Reporting by Elaine Lies; Editing by Michael
Watson)
