Nikkei to fall on profit-taking, focus on nuclear plant

By Antoni Slodkowski

TOKYO, March 23 (Reuters) - Japan's Nikkei average is set to
snap a two-day winning streak on Wednesday as investors may rush
to take profits after a strong come back that was spurred by
slowly improving conditions at a crippled nuclear power plant.

U.S. oil prices jumped after unrest in the Middle
East spread to Yemen, further stoking concerns about disruption
to supply and giving traders more reasons to let share prices
consolidate around current levels, likely trapping the Nikkei in
a narrow range on Wednesday.

Tokyo stocks posted their biggest two-day decline since
October 1987 in the first two sessions after the March 11
earthquake and tsunami, losing as much as 20 percent as a
nuclear safety crisis unfolded, but have recouped most of their
losses and are now just 6 percent below the March 11 close.

"If you throw a ball from a high place, it will bounce back
strongly at first, but the second and third bounce will be
smaller," said Takashi Hiroki, chief strategist at Monex Inc,
who expected the market to stutter on Wednesday.

Nikkei futures last traded in Chicago 40 points
above the latest close in Osaka .

"It's not that the market is ignoring fundamentals. We just
simply don't know them yet, as many companies are still
gathering information about damage sustained during the
disasters," Hiroki said.

Sony Corp cut output at five more plants
and Toyota Motor Corp delayed restarting
assembly lines as the global supply of parts and products began
to feel the full impact of Japan's catastrophic
earthquake.

The broader Topix index came back close to its
200-day moving average at 872 on Tuesday, and analysts said the
immediate resistance level may prove hard to pierce as the
market lacked strong trading cues.

For the Nikkei, support looms at the key 9,500 level.

Analysts said the Nikkei would likely trade between 9,450
and 9,650 on Wednesday.
---------------------MARKET SNAPSHOT @ 2311 GMT ------------
INSTRUMENT   LAST       PCT CHG   NET CHG
S&P 500                    1293.77     -0.36%   -4.610
USD/JPY                    81.02        0.06%     0.050
10-YR US TSY YLD      3.3281          --     0.000
SPOT GOLD                  1427.89     -0.11%    -1.610
US CRUDE                   104.78      -0.18%    -0.190
DOW JONES                  12018.63    -0.15%    -17.90
-------------------------------------------------------------
> Wall St slips after 3-day run; volume at 2011 low
> Euro falls from 4-1/2-month high; yen in tight range
> Fund managers neutral-to-bearish on Treasuries
> Gold flat as rate hikes eyed; geopolitics support
> Oil rises as Yemen unrest escalates, dollar falls

STOCKS TO WATCH:

--Terumo Corp

A U.S.-based unit of the firm said it had entered into a
consent decree with the U.S. Food and Drug Administration and
agreed to stop selling two of its products used in
cardiopulmonary bypass surgery.

--Nippon Steel Corp

Nippon Steel said on Tuesday that output at the three blast
furnaces at its mainstay plant in eastern Japan had recovered to
pre-earthquake levels.

--Aozora Bank

Aozora does not see a need to revise its earnings forecasts
for the year ending in March after Japan was hit by a
devastating earthquake, tsunami and nuclear power plant
accident, CEO Brian Prince told Reuters on Tuesday.

(Reporting by Antoni Slodkowski; Editing by Edmund Klamann)