Nikkei hits 1-1/2-week high on U.S. deal hopes, weaker yen

Reuters

* Nikkei rises in early trade, on track for weekly gain

* Investors remain wary of U.S. political stalemate

* Fast Retailing tumbles on disappointing earnings

By Tomo Uetake

TOKYO, Oct 11 (Reuters) - The Nikkei stock average climbed

more than 1 percent to a 1-1/2-week high on Friday on hopes for

progress in the United States towards ending the fiscal

standoff, with exporters like Nikon Corp gaining as then yen

pulled back from a recent high.

The benchmark Nikkei rose 1.3 percent in midmorning

trade to 14,375.02, its highest level since Oct. 2. It was on

track for a 2.5 percent gain on the week.

"Just a whiff of resolution on the U.S. ceiling debate saw a

sharp risk-on and short squeeze, although it was just a whiff.

You can see how much the debt impasse has been weighing on

markets," said Stefan Worrall, director of equity cash sales at

Credit Suisse in Tokyo.

"The focus, the key question into the next week, is if this

impasse has moved a step closer to being resolved. Everything

else has fallen into the background, even earnings."

House Republican leaders on Thursday offered a plan to

extend the government's borrowing authority for several weeks,

and the White House said it would consider the proposal,

sparking a big rally on Wall Street.

The New York Times later reported President Barack Obama had

rejected the plan, but Republican Paul Ryan told reporters Obama

had neither accepted or rejected the proposal.

The broader Topix climbed 1.6 percent to 1,196.60.

Trade was moderate, with volume at 42.8 percent of its full

daily average for the past 90 trading days.

All 33 Topix subindexes were higher, with financials leading

the gains. The banking sector and the securities

sector rose 2.5 percent and 2.1 percent,

respectively.

Exporters advanced as the dollar strengthened against the

yen. Nikon Corp jumped 4 percent, while Panasonic Corp

and Daikin Industries Ltd both rose 2.9 percent.

The greenback was last quoted 98.45 yen, well off a

two-month low of 96.55 set on Tuesday. A weaker yen helps

Japanese exporters' competitiveness in global markets and boosts

their dollar earnings when repatriated.

Toyota Motor Corp rose 0.9 percent and was the

third-most traded stock on Topix. A jury in California on

Thursday found the carmaker was not liable in one of the first

wrongful-death lawsuits to go to trial in the United States over

alleged defects that caused some vehicles to unexpectedly

accelerate.

But Nikkei heavyweight Fast Retailing Co Ltd lost

as much as 5.4 percent to hit a five-week low after the Uniqlo

clothing chain operator's full-year operating profit came in

below its own target as heavy discounting depressed margins.

It was the second-most traded stock by turnover

on the main board.

The Nikkei has gained 38 percent this year but is still down

10 percent from its May peak.

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