Nikkei jumps 3 pct, trading houses and banks gain

TOKYO (Reuters) - Japan's Nikkei stock average posted its biggest daily percentage gain in eight weeks on Tuesday, jumping 3 percent as Itochu Corp (8001.T) climbed on overnight gains in oil, while financials rose on relief that major U.S. banks' earnings were not as bad as feared.

Shin-Etsu Chemical Co Ltd (4063.T), the world's biggest maker of silicon wafers, gained sharply after it reported a 13 percent rise in quarterly profit.

Toyota Motor Corp (7203.T) raced higher as investors saw the automaker and other recently battered blue-chip exporters as bargains.

After spending much of the day within a narrow range, the market accelerated its gains after trading in Japanese government bond futures was resumed in the late afternoon. A system glitch had forced the Tokyo Stock Exchange earlier to suspend trade of JGB futures, TOPIX index futures and other derivatives.

"The system trouble had an impact on the stock market as it took away arbitrage trading between bonds and stocks," said Masayoshi Yano, senior market analyst at Meiwa Securities, adding that the resumption of trade removed a lid on the market's gains.

"Investors took relief from U.S. banks' earnings, especially Citi. They were not as bad as feared," he said.

Citigroup (C.N), the largest U.S. bank, posted a second-quarter loss that was smaller than analysts' forecasts.

But market analysts said it was too early to say the market had bottomed out in the latest cycle, citing a lack of energy to keep pushing it up.

The benchmark Nikkei .N225 ended up 381.26 points at 13,184.96. It was the biggest daily percentage gain since May 29.

"Today's gain was simply a rebound staged by buying back shares sold earlier," said Fumiyuki Nakanishi, group manager of the investment information department at SMBC Friend Securities.

The broader Topix rose 2.8 percent to 1,287.74. Markets were closed on Monday for a national holiday.

Toyota climbed 5.6 percent to 4,910 yen and Honda Motor Co (7267.T) rose 5.3 percent to 3,600 yen.

"Investors picked up recently battered shares. They saw these as bargains from the viewpoint of (dividend) yield as well," said Meiwa's Yano.

FAST RETAILING LEAPS

Fast Retailing Co Ltd (9983.T) jumped 6.3 percent to a 2-½ year high of 11,370 yen, becoming the biggest contributor to the Nikkei, as the operator of the Uniqlo casual-clothing chain attracted investors with its solid sales growth amid a tough retail environment.

Trading house Itochu jumped 8.6 percent to 1,075 yen, the biggest percentage gainer on the Nikkei. Bigger rival Mitsui & Co (8031.T) gained 6.6 percent to 2,170 yen.

Oil rose on Monday as a tropical storm threatened the Gulf of Mexico and stoked concerns of disruptions to U.S. offshore oil and gas production.

Shin-Etsu Chemical, one of the first major Japanese firms to report April-June results, added 5.2 percent to 6,640 yen. Its quarterly profit was buoyed by solid sales of silicon wafers worldwide, sales of construction materials in emerging markets and an accounting change.

Trade was on a par with the last week's daily average of 1.85 billion shares.

Advancers outpaced decliners by more than 5 to 1.