October 4, 2018 / 3:19 AM / 12 days ago

Nikkei edges lower on profit-taking but automakers, financials rise

* Banks, insurers outperform on rising U.S. yields

* Toyota and SoftBank to partner on self-driving technology

By Ayai Tomisawa

TOKYO, Oct 4 (Reuters) - Japan’s Nikkei edged lower in choppy trade on Thursday morning as investors took profits from its recent rally to a 27-year high, while automakers and tech heavyweights enjoyed the limelight on news of technology tie-ups for self-driving cars.

Toyota Motor Corp surged as much as 2.2 percent after sources told Reuters that the automaker and SoftBank Group Corp would announce a partnership to develop automated driving and other technology on Thursday.

SoftBank surged 3.3 percent.

Honda Motor Co soared as much as 1.9 percent after it said it will invest $2.75 billion and take a 5.7 percent stake in General Motors Co’s Cruise self-driving vehicle unit, to jointly develop autonomous vehicles for ride services fleets around the world.

The Nikkei share average opened higher but dropped 0.2 percent to 24,070.37 in mid-morning trade as market participants reckoned the Nikkei had been overbought in the recent rally.

The Nikkei has traded more than 5 percent above its 25-day moving average of late, a sign the market is overbought.

“Investors had bought Japanese stocks, mainly futures, in the last few weeks, but they have become cautious of an overbought market now,” said Hikaru Sato, a senior technical analyst at Daiwa Securities.

Index-heavyweight stocks such as Fast Retailing fell 1.1 percent on profit-taking after rising 2 percent last week, taking a hefty 25 points off the Nikkei .

Daiwa’s Sato added that a short-term correction in futures was possible, but noted underlining sentiment was likely to be supported by the weak yen.

The dollar traded at 114.55 yen, its highest since early November 2017.

The upbeat U.S. economy is supporting the dollar, particularly so since Federal Reserve Chairman Jerome Powell said on Wednesday that the central bank may raise interest rates above an estimated “neutral” setting as the “remarkably positive” U.S. economy continues to grow.

Insurers and banks, which hunt for higher-yielding products such as U.S. bonds, soared after U.S. Treasury yields jumped to multi-year peaks.

Dai-ichi Life Holdings surged 3.5 percent, T&D Holdings climbed 3.4 percent, Sumitomo Mitsui Financial Group soared 3.0 percent and Mitsubishi UFJ Financial Group jumped 3.2 percent. (Reporting by Ayai Tomisawa; editing by Eric Meijer)

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