Nikkei may dip slightly, eyes on Chinese data

TOKYO (Reuters) - Japan's Nikkei average may dip slightly on Thursday after a sharp rise the day before, with profit-taking fed by U.S. Federal Reserve minutes suggesting additional measures may be needed for the U.S. economy.

Minutes of the Fed's June meeting showed officials are concerned with the pace of economic recovery, adding to jitters stoked by a report showing June retail sales fell more than expected.

Market players said there were signs the benchmark Nikkei .N225, which shot up 2.7 percent on Wednesday, was becoming overheated and that it was likely to drift, perhaps starting a bit lower.

"It wouldn't be at all surprising if the market took a bit of a breather today," said Hiroichi Nishi, general manager at the equity division of Nikko Cordial Securities.

"But over the longer term I think global stock markets are still on a recovery trend."

Wall Street ended flat, breaking a six-day rising streak, as concerns about the economy offset the boost of better-than-expected Intel Corp (INTC.O) the day before. .N

Nikkei futures traded in Chicago closed at 9,790, unchanged from the Osaka close, and market players said the benchmark was likely to move between 9,650 and 9,850.

It closed at 9,795.24 on Wednesday, with gains capped by what some market players said was heavy selling of futures around 9,800.

A slew of Chinese data is due out Thursday morning including second-quarter gross domestic product (GDP) data, which the Nikkei may look to for cues.

Agricultural Bank of China ABC.UL debuts in Shanghai on Thursday and Hong Kong on Friday, and this may provide hints on trading direction as well.

Technically, signs were emerging that the Nikkei may be growing a bit overstretched, with its slow stochastic -- a measure of how oversold the market is and whether it is in a short-term up or down trend -- rising in overbought territory.

Its relative strength index (RSI) is also at the highest in more than 3 weeks, although still a relatively neutral 54. Anything from 70 and above is considered overbought.

STOCKS TO WATCH

-- Toyota Motor Corp (7203.T)

Toyota said on Wednesday that it would fix a steering issue on as many as 500,000 Matrix and Corolla vehicles in the United States, but that the issue would be resolved with a service campaign, not a recall.

-- Yamaha Motor Co (7272.T)

Yamaha Motor unveiled a new electric motorcycle on Wednesday, saying it wanted to lead the nascent market for the zero-emission vehicles with a global share of about 20 percent in 2020.

-- Sumitomo Chemical (4005.T)

Australian farm chemicals group Nufarm (NUF.AX) axed its full-year profit forecast by a third on Wednesday and raised its debt projection, blaming a late, cold winter in North America and Europe for hitting demand.

Following the latest in a string of profit warnings over the past year, Nufarm, one-fifth owned by Japan's Sumitomo Chemical, said the board was now focusing on a wide-ranging review of strategic direction and would change the shape of the business to restore earnings and growth prospects.

-- Honda Motor Co (7267.T)

Honda will drop plans to build a minivehicle factory and focus instead on its green vehicles business, the Nikkei business daily said.

-- Hitachi Ltd (6501.T)

Hitachi is considering around 10 acquisition targets for its information technology business, with IT service providers in the United States and Europe key targets, a senior executive said on Wednesday.