Nikkei set to fall on Mideast unrest, after rally

TOKYO (Reuters) - Japan's Nikkei average is set to move away from its highest levels in over 9 months and fall on Tuesday for the first time in seven days as turmoil in the Middle East sent oil prices sharply higher and global investors shied away from riskier assets the day before.

But analysts said although profit-taking was likely to emerge after the benchmark's longest winning streak in over a year, demand for smaller and peripheral stocks, and signs of pickups in both the domestic and U.S. economies, would limit losses.

Nikkei futures also pointed to a lower start, last trading in Osaka at 10,830, down 27.5 points from the Nikkei's close the day before. U.S. markets were closed for a holiday on Monday.

"Geopolitical risks, with turmoil in oil-rich Libya, will likely discourage investors from any decisive moves, so they'll probably take profits on overbought blue-chip shares for now," said Hiroichi Nishi, general manager at Nikko Cordial Securities.

Investors were closely watching reports of escalating violence in Libya with protests sweeping the capital Tripoli and anti-government forces reportedly taking control of the city of Benghazi.

Market players said energy and commodities stocks were likely to extend recent gains as Brent crude futures hit $108 a barrel for the first time since 2008 on fears the violence might lead to supply disruptions.

Analysts said buying would likely continue in stocks with small market capitalization that have underperformed the overall market.

The Nikkei .N225 edged up 0.1 percent to 10,857.53 on Monday, gaining for a sixth day to mark its longest winning streak in over a year. Analysts said the Nikkei was likely to move between 10,700 and 10,850 on Tuesday.

Market up for 3rd week as late-comers jump in .N > Euro slips on Middle East tensions; data cushions > Treasuries ease in set up for next week's auctions > Gold jumps 1 pct, over $1,400 on Mideast violence > Oil soars on Libya violence, WTI shorts cover

STOCKS TO WATCH

-- Kyowa Hakko Kirin Co Ltd (4151.T)

Kyowa Hakko Kirin has agreed to buy Scottish drug firm ProStrakan Group Plc PSK.L for 292 million pounds ($474.6 million) marking a further expansion by Japan's drug industry into foreign markets.

-- Trend Micro Inc (4704.T)

Trend Micro, a maker of computer antivirus software, said it plans to buy back up to 1.5 percent of its shares for as much as 5.5 billion yen ($66 million).

-- Aeon Co Ltd (8267.T)

Aeon, Japan's second-largest retailer, will take a more than 10 percent stake in Parco Co (8251.T) and seek an alliance with the fashion-oriented shopping mall operator, the Nikkei business daily said, without citing sources.

-- Toyota Motor Corp (7203.T)

Toyota has reassigned 10 percent of its domestic sales personnel to boost sales in emerging markets, the Nikkei business daily reported.

-- Daikin Industries Ltd (6367.T)

Daikin is planning a large R&D facility to serve as home to some 1,600 researchers and engineers now in three different locations, the Nikkei business daily reported on Tuesday.

The research center will be constructed for roughly 30 billion yen at the company's Yodogawa plant in Settsu in Osaka Prefecture in western Japan, which produces air-conditioning equipment and chemicals, said the daily. It said the groundbreaking will be in May, with a scheduled opening date of November 2014.

($1=.6152 Pound; $1=83.16 Yen)

(Reporting by Antoni Slodkowski; Editing by Michael Watson)