Nikkei edges up as banks gain after Lehman results

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By Aiko Hayashi

TOKYO, June 17 (Reuters) - Japan's Nikkei average edged up 0.1 percent on Tuesday, helped higher by bank shares after earnings at Lehman Brothers Holdings LEH.N came in as expected.

The benchmark Nikkei swung in and out of negative territory as investors took a breather from the previous day's rally, with recent gainers such as Honda Motor Co (7267.T) under pressure.

"This is a reaction to yesterday's sharp rise," said Hiroaki Kuramochi, general manager of the financial institutions service department at Tokai Tokyo Securities.

"There's a feeling of relief in the market after Lehman's earings and that prompted some buying, but it also gave an opportunity for profit-taking," Kuramochi said.

The Nikkei .N225 ended morning trade up 18.51 points at 14,372.88. It rose 2.7 percent on Monday to book its highest close in over a week.

The broader TOPIX climbed 0.5 percent to 1,408.23.

"The market will probably hover around this level today after it rose sharply yesterday and there are no additional trading factors to keep buying on," said Yoshinori Nagano, chief strategist at Daiwa Asset Management.

U.S. stocks were mixed on Monday as tech shares rose for a third day, fuelled by optimism about sales for Research in Motion's (RIMM.O) BlackBerry and Apple's (AAPL.O) new iPhone, but blue-chip stocks slipped on brokerage downgrades of telecom stocks.

BANKS UP

Lehman CEO Dick Fuld said the company's franchise and capital position are strong as it posted a $2.8 billion loss, in line with its forecast last week. [ID:nN16467916]

Japanese bank shares rose, with top lender Mitsubishi UFJ Financial Group (8306.T) adding 1.8 percent to 1,101 yen.

No.2 Mizuho Financial Group (8411.T) added 1.1 percent to 571,000 yen and Sumitomo Mitsui Financial Group (8316.T), the third-biggest bank, climbed 2.1 percent to 934,000 yen.

"Worries about the financial system receded somewhat after Lehman's results came in as expected," said Kuramochi at Tokai Tokyo Securities.

Investors sold recent gainers. Honda shed 1 percent to 3,810 yen and Tokyo Electron Ltd (8035.T) shed 1.5 percent to 6,790 yen.

Asahi Glass Co (5201.T) slipped 1.6 percent to 1,358 yen after the Nikkei business daily said the company has cut output of automotive glass in the United States by about 10 percent in response to sluggish car sales.

Trade was moderate on the Tokyo exchange's first section, with 904 million shares changing hands compared with last week's morning average of 1.2 billion.

Advancing stocks outpaced decliners by a ratio of 2 to 1. (Editing by Michael Watson)