Nikkei gains as dollar advances

TOKYO (Reuters) - Japan's Nikkei stock average edged up by 0.4 percent on Monday as the dollar rose, but Toyota Motor Co weakened on worries about a slowing U.S. economy after the biggest monthly fall in jobs there in five years.

Oil field developer Inpex Holdings Inc and other resource-linked shares, including trading houses, climbed after crude oil and precious metals rose overseas. But steelmakers fell on reports of a sharp rise in raw material costs.

Market players said that despite the U.S. jobs data and lingering worries about U.S. banks after a string of cuts in earnings estimates, the fact that Wall Street held largely firm was encouraging.

"The jobs data was bad and what the market had dreaded for so long finally happened -- (bond insurer) MBIA had its rating cut. But even so, Wall Street was able to largely shrug off that sort of bad news," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.

"Markets seem to have simply become resigned to the fact that the U.S. economy's in bad shape, and have factored this in."

On Friday, MBIA Inc's insurance arm lost its top rating from Finch. But while just the chance of such a cut roiled financial markets earlier this year, several other bond insurers have already lost triple-A ratings, and the news was not a surprise.

Others remained a bit more wary.

"I believe the worst may have passed, and markets have priced in a mild recession. But if the recession turns out to not be mild, things could change," said Hiroaki Osakabe, a fund manager at Chiba Asset Management.

The benchmark Nikkei gained 57.17 points to 13,350.39, while the broader TOPIX rose 0.5 percent to 1,295.02.

Attention now will be turning to company earnings, with Japan's second-largest retailer Aeon Co Ltd set to announce results later on Monday.

STEEL SOFTENS, TRADING HOUSES TOUGH

Steel shares fell sharply after the Nikkei business daily reported on Saturday that Japan's No.1 Nippon Steel Corp was expected to agree to a proposed 200 percent increase in coking coal prices by BHP Billiton Ltd for the current year to March 31, 2009.

Smaller rivals are expected to agree to the same hike, with the industrywide costs estimated to be up by 1.5 trillion yen ($14.75 billion) for the fiscal year through next March, the Nikkei said.

Nippon Steel dropped 4.3 percent to 507 yen. JFE Holdings Inc fell 3.3 percent to 4,470 yen and Sumitomo Metal Industries Ltd shed 2.2 percent to 394 yen.

Trading houses and other resource-related shares rose as both oil and gold extended gains during Asian time, though they had fallen back slightly by midday.

U.S. crude for May delivery rose towards $107 after the dollar initially fell and a fire hit a U.S. refinery, and gold rose as a result. Mitsui & Co rose 6.1 percent to 2,255 yen, Mitsubishi Corp rose 4 percent to 3,380 yen and Itochu Corp gained 3.3 percent to 1,060 yen.

Toyota fell 1.6 percent to 4,910 yen, but other automakers managed to eke out gains.

Inpex Holdings rose 1.8 percent to 1.15 million yen.

Trade was moderate on the Tokyo exchange's first section, with 822 million shares changing hands, in line with last week's morning average.

Advancing stocks beat declining ones by 906 to 679.

($1=101.68 yen)

(Editing by Brent Kininmont)