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Nikkei bounces, geopolitical concerns restrain buyers

* Nikkei rises 0.5 pct, Topix up 0.5 pct * Geopolitical woes keep investors sidelined * Mitsui Fudosan up on strong investor demand for its share offer * Shippers down after Baltic Index drops to 1-year low By Tomo Uetake TOKYO, June 17 (Reuters) - Japanese stocks rebounded from steep falls on the previous day, but Tuesday's early session saw most institutions holding back on growing concerns over geopolitical risks in the Middle East and Ukraine.

The benchmark Nikkei gained 0.5 percent to 15,008.42 by the midday break, though it has recovered only about half of its 1.1 percent losses on Monday.

One possible trigger for the rebound was that the Nikkei's 25-day moving average stepped above its 100-day average on Monday, a positive technical signal that could prompt buying from retail traders.

Still, market players said overall market activity was subdued and reflected the cautious mood in global markets amid the Iraq crisis.

"It's almost like the market is holding its breath," said Stefan Worrall, director of equity cash sales at Credit Suisse in Tokyo.

"The underlying tone is constructive but investors are quite happy to wait until greater direction from the U.S or there's some resolution to conflicts," in Iraq and Ukraine, he said.

U.S. stocks closed slightly higher on Monday, supported by a flurry of merger news and positive economic data, but turmoil in Iraq drove oil prices up and kept trading choppy.

The insurgency in Iraq has pushed oil prices higher in recent days, and investors are worried about the broader impact of higher energy costs on global growth.

Tension in Ukraine also showed no sign of abating as Russia cut off gas to Ukraine on Monday in a dispute over unpaid bills that could disrupt supplies to the rest of Europe and set back hopes for peace between the former Soviet neighbours.

Mitsui Fudosan Co Ltd jumped 2.9 percent and was the second-most traded stock by turnover on the main board following strong investor demand for its first share sale in three decades to raise capital.

Itochu Corp climbed 2.8 percent after the Nikkei newspaper said the trading company is targeting a return on equity of 15 percent in the near future, aiming to attract foreign investors.

Bucking the overall market, shippers were by far the worst performer, falling 1.9 percent after the Baltic Dry Index fell to a one-year low. Nippon Yusen KK and Mitsui OSK Lines Ltd shed 2.3 percent and 2.1 percent, respectively.

Meanwhile, traders said that investors are also awaiting for the Federal Reserve's conclusion of a two-day policy meeting on Wednesday, when the U.S. central bank is expected to announce it will continue paring its bond purchase programme and cut its growth projections.

The broader Topix added 0.5 percent to 1,240.88, while the JPX-Nikkei Index 400 advanced 0.5 percent to 11,298.37 by the lunch break.

(Editing by Shri Navaratnam)