January 11, 2019 / 2:59 AM / 8 days ago

Nikkei gains on strong Wall Street; convenience stores fall

* Nikkei has risen 3.7 pct for week

* Fast Retailing soars more than 5 pct

* Retail sector worst performer on the board

By Ayai Tomisawa

TOKYO, Jan 11 (Reuters) - Japanese stocks rallied on Friday tracking a strong U.S. shares, offsetting weakness in convenience stores which reported dismal quarterly earnings on the previous day.

The Nikkei share average rose 0.7 percent to 20,306.16 at the midday break. For the week, it has added 3.7 percent.

The Nikkei has recovered the psychologically important line of 20,000 on hopes of a U.S.-Chinese trade deal, which tempered worries over the impact of the dispute on global growth.

“The Nikkei now seems comfortable above 20,000. It may gradually recover further while it prices in developments of global issues,” said Takuya Takahashi, a strategist at Daiwa Securities.

“The market consensus is that the U.S. and China will compromise to some extent for mutual benefit, but it still remains the market’s major concern,” Takahashi said.

Trade-related optimism faded somewhat as China offered little in the way of details on key issues such as forced technology transfers, intellectual property rights, tariff barriers and cyber attacks.

Still, there was other positive news to keep investors relatively comfortable on equities. Wall Street rose after Federal Reserve Chairman Jerome Powell said the U.S. central bank intends to further shrink the balance sheet.

Tech shares, machinery stocks and automakers gained ground. Advantest Corp jumped 3.6 percent, Komatsu added 2.2 percent, while Honda Motor Co climbed 1.8 percent.

Index-heavy Fast Retailing soared more than 5 percent and contributed a hefty positive 81 points to the Nikkei index. The operator of Uniqlo clothing stores reported an 8 percent fall in its operating profit for the September-November quarter, while it kept its operating profit forecast for the full year through August 2019 unchanged at 270 billion yen.

Analysts downplayed the quarterly profit fall, saying that the weak outcome was due to inventory being cleared on unseasonably warm winter and didn’t reflect on merchandise quality or operational issues.

“It may affect earnings for this fiscal year through August, but its earnings will likely recover in the next fiscal year,” Kuni Kanamori, analyst at SMBC Nikko Securities, wrote in a report.

Industrial equipment maker Yaskawa Electric gained 1 percent after the company cut its operating profit forecast to 53 billion yen from 59 billion yen for the fiscal year ending February, with traders saying that the bottom maybe nearing.

Masayasu Noguchi, an analyst at Nomura Securities, said that the first impression was positive as the company said servo motor order receipts have been recovering since bottoming in September 2018.

The retailer sector stumbled 1.1 percent and was the worst sectoral performer after convenience stores reported disappointing earnings results.

FamilyMart UNY Holdings dropped 1.3 percent after its sales for the March-November period fell 1.7 percent, 7&i Holdings tumbled 2.5 percent after its domestic convenience store segment for the period dropped 1.1 percent, while Lawson Inc shed 1.3 percent as its operating profit for the period fell 11.9 percent.

The broader Topix gained 0.3 percent.

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