Nikkei set to rise, boosted by Wall St

TOKYO Dec 26 (Reuters) - Japan's Nikkei average is expected to open higher on Monday, tracking gains on Wall Street after upbeat housing data and a deal to extend the U.S. payroll-tax cut for two months.

The Nikkei is likely to trade between 8,450 and 8,600, strategists said, after Nikkei March futures in Chicago <0#NIY:> closed at 8,540 on Thursday, up 170 points or 2 percent, from the Osaka close of 8,370.

However, the 25-day moving average at 8,459 will be key, with markets players looking at whether the Nikkei can breach that resistance and remain above it to the year-end.

Trading is also expected to be thin with many markets, including the United States, Europe and Hong Kong closed for extended Christmas holidays.

"CME closed a lot higher than the Osaka close and European and U.S. markets also gained last week," said Hiroichi Nishi, equity general manager at SMBC Nikko Securities.

Nishi said around 70 percent of stocks on Tokyo's main board are undervalued, with a price-to-book ratio of below 1.

On Friday, the S&P 500 closed 0.9 percent higher and turned positive for the year as equities extended their rally after a string of unexpectedly strong economic data.

The Nikkei closed down 0.8 percent at 8,395.16 on Thursday, snapping a two-day winning streak after meeting strong resistance near its 25-day moving average. The broader Topix index slipped 0.4 percent to 723.12.

> Santa rally puts S&P 500 up for the year > Dollar selling likely next week on year-end adjustment > Prices drop as investors offload recent supply > Gold slips as upbeat U.S. data lifts dollar > Oil rises on supply worries, supportive data

STOCKS TO WATCH

-- TEPCO

Tokyo Electric Power Co and a government-backed support mechanism for nuclear disater compensation have asked major lenders to extend the repayment deadline for 2 trillion yen ($25.61 billion) borrowed by the troubled utility, Kyodo news agency said on Sunday.

-- HONDA MOTOR CO

Honda plans to adopt new design and assembly methods to make its vehicles lighter, the Nikkei business daily reported.

-- NIDEC CORP

The Japanese motor maker will reduce its reliance on Thai factories for hard disk drive motors by diversifying production bases to China and the Philippines, the Nikkei business daily reported.

-- SOFTBANK CORP

Softbank will quit its domestic social networking site business after five years, liquidating a joint venture with Rupert Murdoch's News Corp for the Japanese-language version of Myspace, the Nikkei business daily reported.

-- TOYOTA CORP

Toyota has launched a service campaign to fix a potential leak problem in the fuel tank filler pipe on its Etios and Etois Liva models in India, an official at its Indian joint venture said.

-- J-POWER

The Japanese wholesale power supplier is considering alternative ways of restarting a fire-hit 1,200-megawatt coal-fired power plant in Yokohama without using the coal conveyor belt that the smoke originated from, a senior company official said last week.

-- HITACHI

The Japanese company signed a preliminary deal with the Lithuanian government on Friday to build a nuclear power plant in the Baltic state, with the final agreement expected in 2012, officials said. ($1 = 78.1000 Japanese yen) (Reporting by Dominic Lau and Mari Saito; Editing by Michael Watson)