Nikkei rises on late-session buying before German vote

A woman walks past a stock quotation board outside a brokerage in Tokyo September 26, 2011.

TOKYO (Reuters) - The Nikkei average reversed losses to retake the 8,700 level for the first time in over a week, on a rush of buying in the final half-hour of trade as some commodities and U.S. stock futures recovered on hopes of progress on Europe's debt debacle.

Banks were among late-gaining shares, with Sumitomo Mitsui Financial Group (8316.T) and Mitsubishi UFJ Financial Group (8306.T) both adding 2 percent.

A revolt within the government of German Chancellor Angela Merkel ahead of a vote to expand Europe's bailout fund on Thursday had spooked investors, but some have begun to factor in the possibility that the German vote will result in increasing the European Financial Stability Facility's ability to contain the debt woes.

"There are some expectations that Germany will pass the measures, and this has pushed up the euro and U.S. stock futures. Investors are buying back some of the shares they sold so that they don't get left behind," said Kazuhiro Takahashi, general manager at Daiwa Securities.

The Nikkei .N225 finished at 8,701.23, after being down 1 percent at the end of the morning session. The index last traded above 8,700 on September 21, and has moved close to its 25-day moving average of 8,727.

The benchmark has closed higher for three sessions, moving away from a two-and-half year closing low on Monday.

The broader Topix index .TOPX rose 1.1 percent to 762.30.

The late rise tracked a jump in U.S. stock futures, which reversed losses and rallied in the afternoon. S&P 500 e-mini futures were last up 8.25 points at 1,157.

Shares of Konami (9766.T) rose 5.3 percent on healthy volumes after Citigroup added the game developer to its list of most preferred stocks. The brokerage said Konami's earnings momentum was likely to continue on the back of its brisk social gaming business.

Retail sales in Japan fell for the first time in three months, which pushed down retailers.

Seven & I Holdings (3382.T) fell 2.6 percent to 2,185 yen.

Trading companies ended off session lows as commodities recovered. Brent crude erased its losses, and three-month copper on the London Metal Exchange dropped 2.8 percent, paring a nearly 6 percent loss earlier.

Mitsubishi Corp (8058.T) fell 1.7 percent to 1,590 yen and Mitsui & Co (8031.T) lost 2.0 percent to 1,156 yen.

Volume spiked in the last half-hour of trading, and 2.2 billion shares changed hands on the Tokyo Stock Exchange's main board for the day, exceeding Wednesday's 1.9 billion.

Advancers led decliners 1,360 to 200.

(Additional reporting by Vikram Subhedar; Editing by Edwina Gibbs)